Gold traders most bullish in a month After Bernanke

Physical Demand

The metal, which reached a two-year low of $1,321.95 April 16, gained 2.1% this week. Purchases outpaced sales by nine to one after prices began the slump in mid-April, compared with four to one in the first quarter, said Wolfgang Wrzesniok- Rossbach, the chief executive officer of Degussa. Sales this month will be about double the first-quarter average, he said from Frankfurt.

The U.S. Mint sold 209,500 ounces of coins last month, compared with 62,000 ounces in March, its website show. Sales totaled 52,000 ounces so far this month. Central banks also may help boost demand for bullion as they expand reserves. Nations from Brazil to Russia added 534.6 tons last year, the most since 1964, and may buy 450 to 550 tons this year, according to the World Gold Council in London.

The unprecedented money printing by central banks has helped send U.S. equities to records while failing to spur inflation. Expectations for increases in consumer prices, as measured by the break-even rate for 10-year Treasury Inflation Protected Securities, fell 8.1% this year, reaching a nine-month low yesterday.

U.S. Economy

While the International Monetary Fund lowered its 2013 global growth outlook four times since July, the U.S. expansion will accelerate in at least the next four quarters, according to the median of as many as 74 economist estimates compiled by Bloomberg. The dollar climbed to the highest level since July 2010 against six major currencies this week. Gold and the dollar moved in opposite directions in seven of the past nine quarters.

The 2,164.8 tons held by investors through ETPs are now the lowest since July 2011, and this year’s sales now exceed additions in the previous two years, data compiled by Bloomberg show. At least another 435 tons could be sold if the Fed curbs stimulus before the end of the year, Credit Suisse Group AG said in a May 22 report. Prices may reach $1,100 in a year, Ric Deverell, head of commodities research at the bank, said May 16.

Hedge funds and other money managers have never been so bearish. They held 74,432 so-called short contracts in the week to May 14, according to the U.S. Commodity Futures Trading Commission. That’s the highest since the data begins in June 2006. Bullion is now trading 27% below its 2011 record.

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