Gold analysts are the most bullish in a year on speculation that investors are reducing near-record bearish bets after the biggest plunge in prices since 1981.
Fifteen analysts surveyed by Bloomberg News expect gold to rise this week, two are bearish and four neutral, the highest proportion of bulls since December 2012. Short positions held by hedge funds and other large speculators jumped almost fourfold from October to Dec. 24 as the bear market deepened, the latest U.S. Commodity Futures Trading Commission data show. Prices rebounded as much as 5.4% since slumping to a six-month low on Dec. 31.
Gold retreated for the first time in 13 years in 2013 as an improving economy spurred speculation the Federal Reserve wouldac curb stimulus. More than $73.4 billion was erased from the value of gold-backed funds as some investors lost faith in the metal as a store of value. Bullion rallied as much as 21% in two months through August as traders cut short positions and prices that slipped to a 34-month low in June boosted demand for jewelry, coins and bars.
“There is some sense that the market is primed for a short-covering rally,” said Ross Norman, chief executive officer of Sharps Pixley Ltd., a brokerage handling physical bullion in London. “The deeper you push it underwater, the more it’s going to spring back when it does recover. Physical demand at the moment is very robust.”
Bullion rose (COMEX:GCG14) to near a three-week high of $1,246.46 an ounce in London today, rebounding from last year’s 28% slide. The Standard & Poor’s GSCI gauge of 24 commodities fell 2.2% in 2013, while the MSCI All-Country World Index of equities gained 20%. The Bloomberg U.S. Treasury Bond Index lost 3.4%.
Bullion slipped the past four months and reached $1,182.27 on Dec. 31, within 0.1% of the June low. It rebounded since then as some investors closed out bearish wagers, and as physical buyers viewed prices near $1,200 as attractive, HSBC Securities (USA) Inc. wrote in a Jan. 2 report.
The U.S. Mint sold 56,000 ounces of American Eagle gold coins in December, the most since June and contributing to a 14% gain in annual sales, data on its website show. Australia’s Perth Mint sold 41% more gold in 2013 and Turkey’s imports climbed 64% last month to the highest since July, data on the Istanbul Gold Exchange’s website show.
Purchases may rise before China’s Lunar New Year festival on Jan. 31, said Mark O’Byrne, a director at GoldCore Ltd., a brokerage in Dublin. The premium to take immediate delivery gold in China was $21.07 an ounce on Jan. 2, compared with an average of $16.21 in December and $10.07 in November, data compiled by Bloomberg show. The nation probably overtook India as the biggest user last year, the World Gold Council has said.
While Chinese demand helped boost prices, the rally may stall above $1,230, Australia & New Zealand Banking Group Ltd. wrote in a Jan. 2 report. Gold’s “downtrend remains in place” as investors continue to sell metal through exchange-traded products, the bank said.
Gold may fall to the lowest since September 2009 based on a point and figure chart, according to technical analysis by Commerzbank AG. A high pole on the chart formed from mid-October to the beginning of November which was followed by a reversal. A 45 degree resistance line also formed from April and both scenarios are bearish, Commerzbank said.