Bullish positions jump most since July as gold rebounds

Stimulus Measures

Europe’s leaders including German Chancellor Angela Merkel spoke in favor of growth at a two-day summit in Brussels last week. Bank of England Governor Mervyn King said that he sees an argument for bolstering economic recovery by expanding quantitative easing. King and two colleagues were outvoted last month in a push to expand stimulus. The U.S. will use 8.7% of the world’s copper this year, and western Europe will account for 14% of demand, according to Morgan Stanley.

The S&P GSCI is up 86% since the end of 2008 as the Fed expanded its balance sheet to more than $3 trillion, joining central banks from Europe to Asia in global stimulus aimed at boosting growth. U.S. policy makers probably will decide to continue their $85 billion monthly asset-purchase program at a meeting March 19-20, Credit Suisse Group AG economists Neal Soss and Dana Saporta said in a note last week.

Bullish commodity holdings fell 24% since Jan. 1, as equity markets outpaced gains for raw materials. Demand from China, the biggest consumer of everything from copper to soybeans, may decline as industrial output had the weakest start to a year since 2009 and its copper imports tumbled to a 20- month low in February. The country accounts for 42% of global demand for the metal, Barclays Plc estimates.

Supplies Gaining

Copper stockpiles monitored by exchanges in London, New York and Shanghai jumped 43% since the start of the year to the highest since December 2003, data compiled by Bloomberg show. The U.S. Department of Agriculture is forecasting record corn and soybean crops, and U.S. crude-oil stockpiles have climbed for eight weeks. Copper net-short positions, or bets prices will decline, totaled 16,764 contracts on March 12, 2.3% more than a week earlier, CFTC data show.

“The question is: has China peaked?” said Tom Stringfellow, the president of San Antonio-based Frost Investment Advisors LLC, which manages about $9 billion of assets. “If you think there is an economic slowdown coming, that could very well mean another global recession, and you wouldn’t be interested in commodities in general.”

Investors withdrew a net $110 million from commodity funds in the week ended March 13, including $194 million from gold and precious-metals funds, said Cameron Brandt, the director of research for Cambridge, Massachusetts-based researcher EPFR Global, which tracks money flows.

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