Investors should “tilt” their energy holdings by 2.5 percentage points to 25.8 percent of their commodity portfolio, Societe Generale SA said in a report published June 4. Gold positions should be cut by 5 percentage points to 17.6 percent, the bank said.
The International Energy Agency raised forecasts for global oil demand in 2014 by 65,000 barrels a day, following stronger- than-expected growth in the first quarter in Japan, the U.S., Germany and the U.K. World fuel consumption will increase by 1.3 million barrels a day, or 1.4 percent, this year to average a record 92.8 million barrels day, the Paris-based adviser to oil- consuming nations said in a monthly report on May 15.
“We are buying crude and selling gold,” Bill Baruch, a senior market strategist at Iitrader.com in Chicago, said by phone on May 27. “Gold is not the most attractive safe-haven asset at the moment. It’s not been able to produce much yield at all. Crude oil has been moving higher with the better economic outlook.”
Holdings in exchange traded funds backed by gold touched 1,714.4 metric tons on June 16, the lowest since October 2009. In 2013, more than $73 billion was erased from the value of the funds, according to data compiled by Bloomberg.
“We continue to recommend selling gold rallies as we believe that gold is in a multiyear downtrend driven by the prospect of U.S. rate hikes,” Societe Generale said, forecasting that the metal, trading above $1,200 this year, may break below that level in 2015 and fall under $1,000 in 2016.
Goldman Sachs Group Inc. predicted that gold will extend 2013’s 28 percent slump in 2014. The drop last year ended a 12- year rally. An accelerating U.S. economy means bullion will fall to $1,050 in 12 months, Goldman forecasted on May 13.
“We have seen some moves in gold but nothing significant to take it higher,” Laura Taylor, senior market strategist at RJO Futures, said in a telephone interview from Chicago yesterday. “Oil, on the other hand, is more tradable and can go in one direction very fast.”