Gold traders are the most bullish in a month after Federal Reserve Chairman Ben S. Bernanke signaled record stimulus will continue until the economy improves.
Twelve analysts surveyed by Bloomberg expect prices to rise next week, with nine bearish and eight neutral, the highest proportion of bulls since April 26. Prices rose 58% since 2008 as the Fed led central banks in debt purchases. Bullion is poised for its first weekly gain in three and trading and investment company Degussa Goldhandel GmbH said demand this month will be double the first-quarter average.
Investors sold 467 metric tons valued at about $21 billion from exchange-traded products this year as some lost faith in gold as a store of value amid an improving U.S. economy and rally in equities. Raising interest rates or curbing bond buying too soon would endanger the recovery, Bernanke said May 22. While prices entered a bear market last month and hedge funds are making the biggest ever bet against the metal, the slump is boosting purchases of jewelry and coins.
“Gold should still be in demand as an alternative currency,” said Daniel Briesemann, a commodities analyst at Commerzbank AG in Frankfurt. “The quantitative easing by central banks should lead to a depreciation in rates for major currencies and in the end should also lead to some inflation concerns, although this is not an issue at the moment. As long as institutional investors are selling gold ETP holdings, this will probably outweigh robust retail demand.”
The metal fell 17% to $1,387.11 an ounce in London this year after climbing the past 12 years. Gold is the third- worst performer in the Standard & Poor’s GSCI gauge of 24 commodities, after silver and corn. The S&P GSCI dropped 3.7% since the start of January and the MSCI All-Country World Index of equities rose 9.7%. Treasuries lost 0.6%, a Bank of America Corp. index shows.
Bullion rose as much as 2.8% and then fell as much as 1.6% on May 22 after Bernanke expressed concern to Congress that federal budget cuts were blunting the recovery. He said the pace of bond purchases could be reduced in the next few meetings if the jobless rate keeps dropping. Many Fed officials said more progress in the labor market is needed before paring the $85 billion in monthly purchases, minutes of their last meeting showed the same day.