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.
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