Gold Heading for Worst Quarter in Nine Decades on Fed Outlook – Bloomberg

Gold traded near the lowest level in 34 months and headed for the worst quarterly slump in at least nine decades amid speculation the U.S. Federal Reserve will reduce stimulus as economic data beat estimates. Silver was set for its biggest quarterly loss since 1980.

Spot bullion traded at $1,203.75 an ounce at 11:53 a.m. in Singapore after sliding 1.7 percent to $1,180.50, the lowest since August 2010. Prices have dropped 25 percent since the start of April, the biggest quarterly slide since at least 1920, according to data compiled by Bloomberg. Silver rose 1.9 percent after dropping 1.4 percent and was set for its worst quarter since the Hunt brothers tried to corner the market. Platinum tumbled to the lowest since October 2009.

Enlarge image Gold Extends Decline to 34-Month Low on Worst Quarter Since 1920

Gold is heading for the biggest annual decline in more than three decades after gaining for 12 years. Photographer: Akos Stiller/Bloomberg

Gold is poised for the biggest annual decline in more than three decades after gaining for 12 years as the Fed cut borrowing costs to a record to bolster the economy. Investors are selling bullion from exchange-traded products at a record pace as unprecedented money printing by central banks around the world failed to spur inflation. Analysts from Morgan Stanley to Credit Suisse Group AG and Goldman Sachs Group Inc. trimmed gold forecasts this month on prospects for reduced asset purchases.

“We’ve had quite a lot of positive data out of the U.S. and people are still focused on the tapering of stimulus, so gold’s been hit quite hard,” Alexandra Knight, an economist at National Australia Bank, said by phone from Melbourne. “There’s definitely been a loss of confidence in gold and that’s seen in the ETF liquidations. That said, there are still people who are interested in gold but because prices have fallen so much and so rapidly, they’ll wait for some stabilization before buying.”

Investor Sales

Fed Chairman Ben S. Bernanke said this month that the U.S. central bank, which buys $85 billion of Treasury and mortgage debt a month, may trim purchases this year and end the program in 2014 should the economy continue to improve. Data this week showed U.S. consumer spending, durable goods orders, consumer confidence and home sales rose in May, even as economic growth in the first quarter was less than previously estimated.

Gold has fallen 28 percent in 2013 as investors sold 583.2 metric tons of gold from ETPs, erasing more than $63 billion in the value of the funds. Bullion tumbled into a bear market in April, setting off a buying frenzy of coins and jewelry around the world. A lack of accelerating inflation and concern about the strength of the global economy is also hurting silver, platinum and palladium, which are used more in industry.

Singer, Ross

Paul Singer’s Elliott Management Corp. and Schroder Investment Management Ltd.’s Christopher Wyke are among investors sticking with their bullish views. Wyke predicted this week that prices will reach a new high as investors seek insurance against economic and political risk, while Elliott said in April that bullion remains the best store of value.

Retired Eurobond trader and former managing director at Deutsche Bank AG Stanley Ross said in a June 6 interview that he’s very bearish about the world economy in part because of the printing of money by world central banks, and predicts gold will be at twice the price it is now within a year.

Assets in the SPDR Gold Trust, the largest bullion-backed ETP, were unchanged for a second day yesterday after declining to the least since February 2009 on June 25. Holdings have shrunk 21 percent this quarter, the biggest such slide since the fund was introduced in 2004.

Soros, Paulson

Billionaire investor George Soros joined funds run by Northern Trust Corp. and BlackRock Inc. in cutting holdings in the SPDR in the first quarter, U.S. government filings showed in May. John Paulson, the biggest investor, kept his stake of 21.8 million shares. The number of hedge funds investing in gold globally shrank to 290 in May, the lowest since 2010, from 310 in December, according to EurekaHedge Pte Ltd., a Singapore-based research company.

Silver for immediate delivery rose to $18.836 an ounce, reversing a drop to $18.2305, the lowest since August 2010. The metal is 34 percent lower this quarter and has retreated 38 percent in 2013, making it the worst performer on the Standard & Poor GSCI Spot Index of raw materials this year.

Silver plummeted 58 percent in the first three months of 1980. The collapse came after William Herbert Hunt and brothers, Nelson Bunker and Lamar, bought more than 195 million ounces in the 1970s. In 1988, a federal court found that the three had attempted to illegally corner the market.

Lost Faith

One ounce of gold bought as little as 63.581 ounces of silver today, the least in a week. The so-called ratio climbed to 66.4701 this week, the highest since August 2010, as investors sold the metal alongside gold, losing faith in a store of value with ties to economic growth.

Spot platinum fell as much as 2.1 percent to $1,294.60 an ounce, the lowest since October 2009, before trading at $1,314.20. It cost as much as 1.1035 times the price of gold today, the most since August 2011. The metal used mainly in autocatalysts has fallen 16 percent this quarter, the worst showing since the three months to September 2008 when Lehman Brothers Holdings Inc. collapsed.

Palladium was little changed at $646 an ounce and has declined 16 percent this quarter.

To contact the reporter on this story: Glenys Sim in Singapore at gsim4

To contact the editor responsible for this story: James Poole at jpoole4

Seo

Gold Bear Market Seen Extending to $1,303: Technical Analysis – Bloomberg

Gold’s recovery to a three-week high last week is over and prices that entered a bear market in April may fall another 5.5 percent to about $1,303 an ounce, according to technical analysis by UBS AG.

The $1,303 level would be the 50 percent retracement of bullion’s rally from October 2008 to its record in 2011, one of the levels singled out in so-called Fibonacci analysis. A “cross lower” in Stochastic momentum indicators would be a bearish signal, UBS said in a report June 7, when prices dropped the most in three weeks.

Enlarge image Gold Bear Market Seen Extending to $1,303

Gold slid 18 percent this year as an improving U.S. economy increased speculation the Federal Reserve may scale back quantitative-easing measures that helped bullion cap a 12-year bull run in 2012. Photographer: Scott Eells/Bloomberg

Cucchiaro Sees `Heightened Risk' for Gold Selloff 4:26

June 4 (Bloomberg) — Stephen Cucchiaro, chief investment officer at Windhaven Investment Management Inc., talks about the outlook for gold prices and investment strategy. He speaks with Tom Keene and Sara Eisen on Bloomberg Television’s “Surveillance.” Adam Parker, chief U.S. equity strategist at Morgan Stanley, also speaks. (Source: Bloomberg)

“This would suggest the recent recovery is over,” Richard Adcock, a technical strategist at UBS in London, wrote in the report. “The next leg of the bear trend is to be seen down to the long-term 50 percent retracement point at $1,303, which we would set as our objective.”

Gold slid 18 percent this year as an improving U.S. economy increased speculation the Federal Reserve may scale back quantitative-easing measures that helped bullion cap a 12-year bull run in 2012. Prices are now 28 percent below the $1,921.15 record set in September 2011 and investors are holding the least metal through exchange-traded products in more than two years.

Bullion for immediate delivery traded at $1,379.32 by 11:17 a.m. in London, after dropping 2.2 percent on June 7. It had reached $1,423.90 the day before, the highest since May 15. If gold were to fall below $1,350, there may be “nothing” to support prices between there and the $1,200 to $1,225 area, economist Dennis Gartman wrote today in his daily report.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a high or low. Stochastics, technical analysis tools based on momentum measures, are often used to identify whether a security’s price is overbought or oversold.

To contact the reporter for this story: Nicholas Larkin in London at nlarkin1

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2

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Hedge Funds Boost Gold Bull Bets Most in Two Months: Commodities

Hedge funds raised bets on a gold rally by the most in two months as the U.S. economy expanded less than previously estimated, boosting speculation the Federal Reserve will maintain the pace of stimulus.

Speculators raised their net-long position by 35 percent to 48,096 futures and options by May 28, the biggest gain since March 19, U.S. Commodity Futures Trading Commission data show. Most of the gain came from a drop in short bets, which reached a record a week earlier. Net-bullish wagers across 18 U.S.-traded commodities climbed 13 percent to a nine-week high of 652,708 contracts, led by gains in corn and natural gas.

The U.S. economy grew at a 2.4 percent annualized rate in the first quarter, the Commerce Department said May 30, cutting its previous estimate of 2.5 percent. Fed Chairman Ben S. Bernanke said May 22 that ending the central bank’s stimulus program prematurely could endanger the recovery. Bullion surged 58 percent since the end of 2008 as central banks printed money on an unprecedented scale to boost growth.

“Gold continues to be useful as an insurance policy in people’s portfolios to guard against uncertainty and possibly some economic dislocation,” said Michael Cuggino, who manages about $14 billion of assets at Permanent Portfolio Family of Funds Inc. in San Francisco. “You have a lot of monetary creation going on, and while inflation is not a current threat, that doesn’t mean it’s not a threat at some point.”

May Returns

Gold futures rose 0.4 percent last week, for a second weekly gain. The Standard & Poor’s GSCI Spot Index of 24 commodities fell 1.4 percent, the most in six weeks. The MSCI All-Country World of equities dropped 1.4 percent, while the dollar weakened 0.4 percent against six major trading partners. A Bank of America Corp. index shows Treasuries lost 0.7 percent.

Bankers advising the Fed said they expect the record stimulus to last as long as three years, according to minutes of a May 17 meeting released last week. The Fed is buying $85 billion of assets a month. Japan is making monthly bond purchases of more than 7 trillion yen ($69.7 billion).

Demand in India, the world’s largest bullion buyer, is poised for a quarterly record as imports reach 300 to 400 metric tons, the World Gold Council said May 29. That’s equal to almost half last year’s total purchases. The U.S. Mint’s sales of American Eagle gold coins reached 70,000 ounces last month, 32 percent more than a year earlier. Sales doubled in the first five months of 2013.

Divided Outlook

Traders are divided in their outlook for prices, with 15 analysts surveyed by Bloomberg expecting the metal to rise this week. Thirteen were bearish, and five neutral. Investors cut their short holdings by 10 percent to 71,311 contracts, the biggest drop since March 19.

Short wagers may keep declining after prices rallied 2.3 percent in the two days after the cut-off date for the CFTC data. A drop in contracts outstanding on the Comex also “likely reflects bouts of short covering,” Edel Tully and Joni Teves of UBS AG said in a report. Gold open interest dropped more than 8 percent last month, bourse data through May 30 show.

Holdings in exchange-traded products backed by gold retreated for a fifth month in May, dropping 5.4 percent to 2,152 tons, the lowest since June 2011. The value of the assets tumbled $45.7 billion this year as some investors lost faith in the metal as a store of value. Billionaire George Soros joined funds managed by Northern Trust Corp. and BlackRock Inc. in cutting holdings of ETPs in the first quarter, filings with the Securities & Exchange Commission show.

Decade Long

“Physical demand for gold has been good, but it hasn’t been enough to offset the losses coming out of ETFs,” said Timothy Hoyle, the director of research at Radnor, Pennsylvania-based Haverford Investments, which oversees about $6 billion of assets. “Gold has been in a decade-long bull market, and I could see gold continue to tread water for a while now or even trade down. Things really need to go wrong in the economy for gold to go up.”

Investors pulled $1.03 billion from gold funds in the week ended May 29, according to Cameron Brandt, the director of research for Cambridge, Massachusetts-based EPFR Global, which tracks money flows. Total outflows from commodity funds were $1.24 billion, according to EPFR.

Wagers on a rally in crude oil dropped 6.2 percent to 217,531 contracts, the first decline since April 23, the CFTC data show. Platinum holdings fell for a second week to 18,873 contracts, the lowest since August. Bets on higher cotton prices tumbled 21 percent, the most since investors were net short in November.

Monetary Fund

The funds trimmed their net-short position in copper to 8,872 contracts from 9,033 a week earlier. Speculators have been betting on a decline since the end of February. Prices in New York dropped 9.9 percent this year on signs that supplies will exceed demand. The International Monetary Fund on May 29 cut its forecast for expansion this year and next in China, the world’s biggest consumer of commodities from cotton to soybeans to zinc.

A measure of net-long positions across 11 agricultural products gained 28 percent to 293,716 contracts, paring this year’s drop to 27 percent. The S&P Agriculture Index of eight commodities declined 4.8 percent since the start of January.

“As long as the economic growth picture in China and Europe remains in question, we think there’s not a compelling case for commodities,” said Jim Russell, a senior equity strategist in Cincinnati at U.S. Bank Wealth Management, which oversees about $110 billion in assets. “We view it as a macro-economic supply-demand type dynamic, and right now it feels like the demand is maybe slipping away a little.”

To contact the reporter on this story: Joe Richter in New York at jrichter1

To contact the editor responsible for this story: Steve Stroth at sstroth