Gold traders are the most bearish in 3 1/2 years after prices fell to the lowest since 2010 following Federal Reserve Chairman Ben S. Bernanke’s comments that the central bank may start curbing stimulus.
Fifteen analysts surveyed by Bloomberg expect prices to fall next week, with six bullish and five neutral, the largest proportion of bears since January 2010. The metal slumped below $1,300 an ounce for the first time since September 2010 yesterday. Investors sold 525.9 metric tons valued at about $21.9 billion from exchange-traded products this year.
Gold as much as doubled since 2008 as quantitative easing swelled the Fed’s balance sheet to a record $3.41 trillion. Bernanke said June 19 the central bank may start reducing the $85 billion in monthly debt buying this year and end the program in 2014. Bullion is heading for its first annual drop since 2000 after some investors lost faith in the metal as a store of value.
“The comments by the Fed are really the last signal for the soft hands that the bull market in gold is ending,” said Frederique Dubrion, the Geneva-based president and chief investment officer of Blue Star Advisors SA, which manages metals and energy assets. “One of the appeals of gold, especially since 2008, was because of quantitative easing. That they are going to slow down the pace of purchasing is not a good signal for gold.”
The metal reached $1,269.46 in London today, the lowest since September 2010, before rebounding for the first gain this week. This year’s 23% slump to $1,293.14 is set to be the worst since 1981. The Standard & Poor’s GSCI gauge of 24 commodities dropped 5.9% since the start of January and the MSCI All-Country World Index of equities rose 3%. Treasuries lost 2.4%, a Bank of America Corp. index shows.
The yield on the benchmark 10-year Treasury note rose to 2.51% today, the highest since August 2011, two days after Bernanke’s comments indicated the Fed sees the economy healing from a burst credit bubble. The 1.7% growth in the U.S. economy this quarter will accelerate in the next five quarters, economist estimates compiled by Bloomberg show.
The 2,106.1 tons of bullion held through ETPs is the lowest since March 2011, data compiled by Bloomberg show. Billionaire John Paulson, the biggest investor in the SPDR Gold Trust, the largest gold ETP, had a 13% loss in his Gold Fund last month. The slump also hurt Newcrest Mining Ltd. Australia’s top gold producer, which said this month it will write down the value of its assets by as much as A$6 billion ($5.5 billion).