Gold trade most bearish since ’10 as Fed spurs drop

RSI Index

Bullion’s 14-day relative strength index was at 28.9 today, below the level of 30 that indicates to some analysts who study technical charts that a rebound may be imminent. When the measure settled below 30 in May, prices rose as much as 6.4% in the following three weeks.

Hedge funds and other large speculators cut their net-long position by 4.1% to 54,779 contracts in the week to June 11, U.S. Commodity Futures Trading Commission data show. That’s still up 54% from May 21, when bets on higher prices were at the lowest in almost six years.

Gold may drop to $1,250 in a month, UBS AG wrote in a report yesterday, while Ric Deverell, head of commodities research at Credit Suisse Group AG, said prices will probably fall to about $1,100 in a year. Nouriel Roubini, professor of economics and international business at New York University, has forecast a decline toward $1,000 by 2015. The metal reached a record $1,921.15 in September 2011.

Sugar Survey

In other commodities, six of 10 people surveyed expect raw sugar to rise next week and one was neutral. The commodity slid 13% to 16.89 cents a pound on ICE Futures U.S. in New York this year.

Fourteen of 25 surveyed anticipate lower corn prices and eight said the grain will gain, while 15 of 26 said soybeans will drop and 10 expect higher prices. Twelve traders predicted declines in wheat and six were bullish. Corn slid 20% to $5.6125 a bushel this year in Chicago. The December contract, which reflects supply after the U.S. harvest, is down 6.4% this year. Soybeans fell 9.3% to $12.7825 a bushel, as wheat slipped 8.9% to $7.0875 a bushel.

Fourteen traders and analysts surveyed expect copper to drop next week, five were bullish and four were neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, fell 14% to $6,820.25 a ton this year.

The S&P GSCI gauge of commodities slipped 10% since mid-February and Deutsche Bank AG said in a June 18 report that prices are poised to remain in “subdued territory for years to come.” The MSCI All-Country World Index fell to the lowest in three months this week following Bernanke’s comments and as a private report showed manufacturing shrank at a faster pace in China, the biggest user of everything from copper to coal.

“There’s definitely a bearish sentiment in the market” following the Fed outlook, said Tom Pugh, a commodities economist at Capital Economics Ltd. in London. “We also just had the Chinese PMI numbers, which were obviously weak. That’s not so damaging for agricultural markets as it is for things like industrial metals.”

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