“People are still lining up in China and India to buy the physical gold,” said John Kinsey, who helps manage about C$1 billion at Caldwell Securities Ltd. in Toronto. “Europe has got a stimulus program. The U.S. has a stimulus program. Japan has a stimulus program. You’d think there would be huge inflation coming with all this debt that’s being printed.”
Even as economists at Morgan Stanley and Credit Suisse Group AG predict policy makers will keep deploying stimulus, consumer prices have remained stable. Inflation expectations as measured by the break-even rate for five-year Treasury Inflation Protected Securities on April 18 reached the lowest since November.
Deutsche Bank AG cut its outlook for this year’s average gold prices by 6.4% to $1,533 on May 10. That would be the lowest annual average since 2010. The bank said last month the metal could drop to as low as $1,050.
Funds raised wagers on costlier crude oil by 5.5% to 204,534 contracts, the highest in five weeks, the CFTC data show. Investors trimmed bets on declining copper prices to a net-short position of 16,798, from 23,368 a week earlier.
A measure of speculative positions across 11 agricultural products jumped 19% to 236,184 contracts, a fourth consecutive gain. Wagers on a corn rally jumped 35% to 61,632 futures and options. Investors boosted their net-short holding in wheat to 10,444, from 5,779 a week earlier.
The S&P GSCI Agriculture Index of eight commodities fell 1.7% last week, the third drop in four weeks. The gauge fell 5.7% this year. Global farmers will harvest the biggest grain and soybean crops ever, boosting food reserves, the U.S. government said May 10. U.S. corn inventories will double as farms recover from the worst drought since the 1930s.
“The decline in the commodity market that we’ve seen in the last several years coincides with inflation risk really being low,” said Nelson Louie, the global head of commodities at New York-based Credit Suisse Asset Management, who helps manage $10.9 billion. “Over the last several years, investors have gone into gold as market risk has become more elevated, but more recently as some of these issues have subsided, there’s been an unwinding of that trade.”