Gold traders are the most bearish since June as the threat of an imminent attack on Syria eased and speculation mounted the Federal Reserve will start curbing stimulus as the U.S. economy improves.
Fifteen analysts surveyed by Bloomberg expect prices to fall next week, seven were bullish and three were neutral, the largest proportion of bears since June 21. Gold rose (COMEX:GCZ13) as much as 5.4% since the alleged Aug. 21 chemical attack in Syria that the U.S. said the government should be held accountable for. Prices retreated to a five-week low today as the U.S. pursued a proposal that Syria surrender its chemical weapons.
Gold is set for the first annual drop in 13 years as faith in the metal as a store of value weakened and the Fed indicated it could buy fewer bonds. Goldman Sachs Group Inc. said tapering may spur more gold sales and Societe Generale SA advised selling bullion. Prices rose to a three-month high Aug. 28 on concern that strikes on Syria will disrupt Middle East oil supply and stoke inflation, increasing demand for gold as a hedge.
“With Syria there may be some volatility going forward but I doubt if it will have an impact unless you have huge escalation,” said Georgette Boele, a commodities strategist at ABN Amro Group NV in Amsterdam. “If the Fed doesn’t surprise majorly in one way or another and the sentiment improvement continues, there’s no reason to be in gold.”
The metal fell 21% to $1,319 an ounce in London this year and tumbled into a bear market in April. Prices slid as much as 9% since Aug. 28. The Standard & Poor’s GSCI gauge of 24 commodities added 0.3% this year and the MSCI All-Country World Index of equities gained 12%. The Bloomberg U.S. Treasury Bond Index lost 3.8%.
Oil futures (NYMEX:CLV13) fell 4.1% since reaching a two-year high on Aug. 28. U.S. President Barack Obama said Sept. 10 he was asking Congress to postpone the vote authorizing military action following a Russian-backed proposal to place Syria’s chemical arsenal under international control. Syria said it would abide by an international treaty banning the chemical arms.
There are signs bullion demand is already waning after prices jumped 12% from a 34-month low in June. Sales of coins and bars from Australia’s Perth Mint dropped 46% in August from July. The U.S. Mint sold 11,500 ounces of American Eagle gold coins in August, the least in six years and down from as much as 209,500 ounces in April.
The rebound in gold is over and investors should sell as it drops toward $1,200 by the end of this year, Societe Generale said in a Sept. 10 report. Prices will be at $1,300 in three months and $1,175 in a year as the U.S. economy strengthens and the Fed slows stimulus, Goldman said in a report the following day. It says there’s a risk it could drop below $1,000. ABN Amro predicts $1,100 by the end of the year.
The metal rose 70% from December 2008 to June 2011 as the U.S. central bank pumped more than $2 trillion into the financial system by buying debt. Policy makers will cut monthly purchases by $10 billion at their Sept. 17-18 meeting to $75 billon, a Bloomberg News survey of 34 economists Sept. 6 showed.
The central bank reiterated in July that near-zero borrowing costs will be appropriate as long as the unemployment rate remains above 6.5% and the inflation outlook doesn’t exceed 2.5%. The jobless rate was 7.3% in August, the Labor Department said Sept. 6. Consumer prices increased 2% in the 12 months ended in July.
“Tapering concerns are overblown,” said Adrian Day, who manages about $135 million of assets as the president of Adrian Day Asset Management in Annapolis, Maryland. “Even a reduction in bond buying from $85 billion a month to $65 billion is still a lot of new stimulus.”
Hedge funds and other large speculators are the most bullish since January, increasing their net-long position by 3.6% to 101,396 futures and options in the week through Sept. 3, U.S. Commodity Futures Trading Commission data show. While wagers on gains more than tripled since the end of June, the position is still 49% below the level reached when prices set a record $1,921.15 in September 2011.
John Paulson, the billionaire hedge fund manager and biggest investor in the SPDR Gold Trust, the largest gold-backed exchange-traded product, cut his stake in the fund by 53% last quarter, a government filing showed. Global holdings that fell every month this year are little changed since reaching a three-year low of 1,946.9 metric tons on Aug. 8, data compiled by Bloomberg show. The combined holdings are now valued at $82.6 billion, from a peak of $147.7 billion in October.
Gold fell below its 100-day moving average this month after rising above the measure in August. It had held below the indictor since December and September’s drop also took prices below the 50-day moving average this week. Some analysts study technical charts to gauge possible future price moves.
Five of 10 people surveyed expect raw sugar to gain next week and five were bearish. The commodity slid 9.3% to 17.70 cents a pound on ICE Futures U.S. in New York this year.
Twelve of 27 surveyed anticipate lower corn prices and six said the grain will rise, while 13 of 28 said soybeans will gain and nine expect lower prices. Ten predicted advances in wheat and eight were bearish. Corn fell 33% to $4.645 a bushel this year in Chicago. Soybeans lost 0.8% to $13.9775 a bushel, as wheat dropped 17% to $6.49 a bushel.
Six traders and analysts surveyed expect copper to fall next week, five were bullish and eight neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, dropped 11% to $7,057.25 a ton this year.
The S&P GSCI gauge of raw materials fell 4% since a six-month high on Aug. 28, partly because of the drop in oil and gold futures which account for about half the index.
“The market is really expecting some tapering,” said Michael Widmer, head of metal markets research at Bank of America Merrill Lynch in London. “If you get $20 billion in cuts everything would be hit very hard. If you get a little bit of tightening, but not as much as the market expected, and you have stronger growth, then prices could remain strong.”
*T Gold survey results: Bullish: 7 Bearish: 15 Hold: 3 Copper survey results: Bullish: 5 Bearish: 6 Hold: 8 Corn survey results: Bullish: 6 Bearish: 12 Hold: 9 Soybean survey results: Bullish: 13 Bearish: 9 Hold: 6 Wheat survey results: Bullish: 10 Bearish: 8 Hold: 5 Raw sugar survey results: Bullish: 5 Bearish: 5 Hold: 0 White sugar survey results: Bullish: 5 Bearish: 4 Hold: 1 White sugar premium results: Widen: 1 Narrow: 6 Neutral: 3 *T