Gold traders are the most bullish in two months after mainland China imported the most metal ever from Hong Kong and investors bought US bullion coins at the fastest pace in more than two years.
Eighteen of 23 surveyed by Bloomberg expect the metal to gain next week, the highest proportion since November 11. Mainland China imported almost 102.8 tonnes in November, valued at about $5.4 billion, trade data on Jan. 11 showed. The US Mint said it sold 85,500 ounces of American Eagle gold coins in the first 12 days of January. Full-month sales would reach 213,750 ounces at that pace, the most since December 2009.
Bullion rallied 6.2 per cent since plunging to within 1 percentage point of a bear market on December 29, on mounting concern that economic growth is slowing and European leaders are failing to contain the region’s debt crisis. Holdings in exchange-traded products backed by the metal are heading for the biggest weekly expansion since mid-November and are within two per cent of an all-time high, data compiled by Bloomberg show.
“The thing that’s caught people’s minds is the massive increase in Chinese buying,” said Ross Norman, chief executive officer of Sharps Pixley Ltd., a brokerage handling physical bullion in London. “Gold has demonstrated time and time again its ability to hold purchasing power. It looks expensive and people talk about bubbles, but it’s not.”
World Index
Bullion rose 10 per cent last year on the Comex in New York, beating the 1.2 per cent drop in the Standard & Poor’s GSCI Total Return Index of 24 commodities and the 9.4 per cent decline in the MSCI All-Country World Index of equities. Treasuries returned 9.8 per cent, a Bank of America Corp index shows.
The metal fell almost 19 per cent from its record closing price of $1,891.90 an ounce on August 22 through December 29, taking it below its 200-day moving average for the first time since January 2009. Prices closed above the moving average on Jan. 10 and settled at $1,630.80 in New York on Saturday.
Holdings in bullion-backed ETPs reached 2,357.3 tonnes yesterday, valued at $124.1 billion and exceeding the reserves of all but four central banks.
China overtook India in the third quarter as the largest gold-jewelry market, according to the World Gold Council. The gain in imports from Hong Kong may be a sign the central bank is adding to reserves, according to Sharps Pixley’s Norman. The People’s Bank of China last made known its gold reserves of 1,054 tonnes more than two years ago.
Call options
There were 8,002 call options traded on January 11 giving holders the right to buy the metal at $2,200 by July, and the six most widely held holdings are for calls at 22 per cent above prices on Saturday, Comex data show. Options traders are making fewer bearish bets against the SPDR Gold Trust, the biggest gold- backed ETP, than at any time in the past 20 months.
Gold is also benefiting from concern the euro zone will tumble back into recession. Germany, the region’s biggest economy, shrank “roughly” 0.25 per cent in the fourth quarter from the third, the Federal Statistics Office said Jan. 11. The euro region will contract 0.2 per cent this year, compared with growth of 1.6 per cent in 2011, the median of 21 economist estimates compiled by Bloomberg show.
The rebound in gold is being threatened by a strengthening dollar, which rose to a 15-month high against six major currencies this week. The 30-week correlation coefficient between the greenback and bullion is now at -0.43, data compiled by Bloomberg show, with a figure of -1 meaning the two always move in opposite directions.
Housing Stagnant
Global equities climbed on Saturday to the highest level since mid-November, and the US Federal Reserve said January 11 that the economy improved last month across most of the country even as hiring was limited and housing remained stagnant.
“Gold was held back toward the end of last year because of dollar strength and people having more confidence in the U.S. economy,” said Carole Ferguson, an analyst at Fairfax IS in London. “If people feel the US economy will pull the whole world up a little bit, then you could see gold being very flat to trading down.”
Hedge funds and other money managers have become less bullish, cutting bets on higher prices by 56 per cent since the beginning of August. They reduced their net-long position to 110,594 futures and options in the week ended January 3, the lowest since January 2009, US Commodity Futures Trading Commission data show. The last time the position was that low, prices climbed about 17 per cent in the next four weeks.
Benchmark Contract
Ten of 22 traders and analysts surveyed by Bloomberg expect copper to fall next week and three were neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, declined 21 per cent last year and gained 5.3 per cent this month to $8,000 a tonne.
Raw sugar retreated 27 per cent last year and settled at 23.84 cents a pound on Saturday on ICE Futures US in New York, and a 2.3 per cent gain this month. Six of 11 people surveyed expect prices to gain next week.
Fourteen of 22 anticipate higher corn prices, while 15 of 24 said soybeans will advance. Corn fell 7.3 per cent this month to $5.995 a bushel after increasing 2.8 per cent in 2011. Soybeans are down 4.1 per cent this month at $11.5825 a bushel after sliding 14 per cent last year.
“You have a potential disturbance factor which is the euro crisis,” said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. “Investors are optimistic that the global growth rates are still high enough to support demand and commodity prices.”
