By Nicholas Larkin - Jan 6, 2012 1:11 PM GMT+0700
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Gold rallied 4.2 percent in the four days ended Jan. 4, the longest run of gains since October. Photographer: Guenter Schiffmann/Bloomberg
Jan. 5 (Bloomberg) –- Peter Hickson, a commodities analyst at UBS AG, talks about the outlook for crude oil and gold prices. He speaks from Hong Kong with Caroline Hyde on Bloomberg Television's "First Look." (Source: Bloomberg)
Gold traders are the most bullish in a month as Europe’s deepening debt crisis and increasing tensions over Iran drove the metal to its longest winning streak since October.
Ten of 22 surveyed by Bloomberg expect the metal to gain next week and five were neutral, the highest proportion since Dec. 9. The U.S. Mint sold 45,500 ounces of American Eagle gold coins this month, compared with 65,500 ounces in the whole of December and 41,000 in November, data on its website showed.
Britain and France will press the European Union to stop Iranian crude imports at a Jan. 30 meeting, in response to the country’s nuclear program. Iran is threatening to retaliate by blocking the Strait of Hormuz, a key chokepoint for global oil supplies. Greek Prime Minister Lucas Papademos warned his nation may face economic collapse as soon as March. Investors are holding (.GLDTONS) a near-record amount of gold through exchange-traded products after the metal rose for an 11th consecutive year.
“European sovereign-debt risk and the geopolitical risk of the Iranian situation escalating should support gold,” said Mark O’Byrne, executive director of Dublin-based GoldCore Ltd., a brokerage that sells everything from quarter-ounce British Sovereigns to 400-ounce bars. “Gold’s safe-haven attributes will continue to be in demand.”
Annual Gain
Bullion rose 10 percent last year, beating the 1.2 percent decline in the Standard & Poor’s GSCI Total Return Index of 24 commodities and the 9.4 percent retreat in the MSCI All-Country World Index of equities. Treasuries returned 9.8 percent last year, a Bank of America Corp. index shows.
The metal, which traded at $1,625.57 an ounce at 6:09 a.m. in London, fell almost 19 percent from its record closing price of $1,900.23 on Sept. 5 through Dec. 29, within 1 percentage point of the common definition of a bear market. Gold rallied 5.1 percent in the past six days, the longest run of gains since August.
Traders also anticipate advances in raw sugar, corn and soybeans next week. Copper may decline, the surveys showed.
Holdings in bullion-backed ETPS reached 2,355.3 metric tons on Jan. 4, within 2 percent of the all-time high set Dec. 13, data compiled by Bloomberg show. The hoard, valued at $121.7 billion, exceeds the reserves of all but four central banks.
Money Managers
Hedge funds and other money managers cut bets (.MMGCNET) on higher prices to 111,919 futures and options in the week ended Dec. 27, the lowest since January 2009, U.S. Commodity Futures Trading Commission data show. The drop preceded the rally in prices. The last time the net-long position was that low, prices climbed about 16 percent in the next four weeks.
The U.S. and its allies are tightening restrictions on Iran, accusing it of a covert plan to build nuclear weapons, a charge Iran’s government denies. About one in six barrels of oil traded worldwide flows through the Strait of Hormuz between Iran and Oman, according to the U.S. Department of Energy.
Brent crude may rally 11 percent to $125 a barrel should the EU ban imports of Iranian oil, according to Societe Generale SA. Some investors buy gold as a hedge against faster inflation, which may quicken if oil prices advance.
Greece’s Papademos is racing to complete a voluntary swap of debt with private bondholders, part of the new rescue plan for the country which also includes 130 billion euros ($167 billion) of public funds. France’s credit outlook was lowered by Fitch Ratings on Dec. 16 on the “heightened risk of contingent liabilities” from the escalating euro-region crisis. Standard & Poor’s is reviewing the ratings of France and Germany.
‘Liquidity Dries Up’
“If the debt crisis blows up it could affect banking liquidity, and if liquidity dries up, all commodities, even gold, will fall,” said Marc Ground, a commodities strategist at Standard Bank Plc in Johannesburg.
A weakening rupee is also driving up prices in India, the biggest consumer, damping demand. Imports may drop 48 percent to 150 tons in the first quarter from a year earlier, Prithviraj Kothari, president of the Bombay Bullion Association, said Jan. 3. Imports fell to 875 tons to 880 tons last year from 958 tons in 2010, he said.
Turkey bought about 41.3 tons of gold for official reserves in November, data from the International Monetary Fund shows. Central banks may buy 600 tons this year, according to Goldman Sachs Group Inc. Combined official holdings stand at 30,744 tons, data from the London-based World Gold Council show.
Buying Gold
The banks were also buying gold in 1980 as prices rose to a then-record $850, only to drop for most of the next 20 years. Bullion tripled from 1999 through the beginning of 2008 as the banks sold more than 4,000 tons. Bullion may reach $2,140 this year, according to 44 analysts, traders and investors surveyed by Bloomberg at the end of 2011.
Nine of 17 traders and analysts surveyed by Bloomberg expect copper to fall next week. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, declined 21 percent last year and was at $7,576.76 a ton.
Raw sugar retreated 27 percent last year and was at 24.19 cents a pound on ICE Futures U.S. in New York. Eleven of 13 people surveyed expect prices to climb next week.
Ten of 20 anticipate higher corn prices, while nine of 21 said soybeans will advance. Corn rose 2.8 percent last year and was at $6.43 a bushel in Chicago. Soybeans were at $12.11 a bushel after sliding 14 percent in 2011.
“We’ve still got significant hurdles to be jumped in the next couple of months,” Peter Hickson, a commodities strategist at UBS AG, said in an interview yesterday on Bloomberg Television’s “First Look.” “Some time toward the end of the first quarter into the second quarter I think people will become more optimistic about the second half of the year.”
Gold survey results: Bullish: 10 Bearish: 7 Hold: 5
Copper survey results: Bullish: 6 Bearish: 9 Hold: 2
Corn survey results: Bullish: 10 Bearish: 5 Hold: 5
Soybean survey results: Bullish: 9 Bearish: 7 Hold: 5
Raw sugar survey results: Bullish: 11 Bearish: 2 Hold: 0
White sugar survey results: Bullish: 10 Bearish: 2 Hold: 1
White sugar premium results: Widen: 4 Narrow: 5 Neutral: 4
To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net.
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.
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