Ten of 21 surveyed by Bloomberg expect the metal to gain next week, the lowest proportion since July 29. Three were neutral. While bullion’s slide of as much as 9 percent this week took its drop from the record $1,923.70 an ounce reached in September to almost 20 percent, the common definition of a bear market, investors are still holding the most metal ever in exchange-traded products, a wager now valued at $119.2 billion.
Commodities retreated the most in almost three months and more than $640 billion was wiped off the value of global equities on Dec. 14 after the Federal Reserve refrained from taking new stimulus measures. That combined with signs of increased funding stress in Europe helped drive the dollar to the highest since January against the euro. Gold typically moves in the opposite direction to the U.S. currency.
Bullion rose 12 percent to $1,590.10 an ounce this year on the Comex in New York. Even after this week’s rout, it’s still the third-best performer in the Standard & Poor’s GSCI gauge of 24 commodities, which fell 1.7 percent. The MSCI All-Country World Index of equities retreated 12 percent this year and Treasuries returned 9.6 percent, a Bank of America Corp. index shows.
Options traders are still bullish. The most widely held option gives owners the right to buy gold at $2,000 by March, data from the bourse show. The eight biggest holdings are all call options at 15 percent or more above prices today.
Investors added about 4.1 metric tons of gold to their ETP holdings this week, even as prices slumped, data compiled by Bloomberg show. They now have a combined 2,360.8 tons, greater than the reserves of all but four of the world’s central banks and equal to more than 10 months of global mine supply.
Demand for physical gold accelerated this quarter at the fastest pace in more than a year as Europe’s debt crisis deepened. The European Central Bank cut interest rates for a second consecutive month last week to shore up growth. Lower interest rates increases the appeal of gold because it generally earns investors returns only through price gains.
“The fundamentals remain positive,” said Adrian Day, the president of Adrian Day Asset Management in Annapolis, Maryland. “Both the European Central Bank and Fed remain easy. After this cleansing, gold will move up again.”
Bullion may be poised for more declines, Gartman wrote yesterday in his Suffolk, Virginia-based Gartman Letter. On Dec. 13 he said traders were witnessing the “death of a bull” and “the beginnings of a real bear market” that may drive prices as low as $1,475. While gold is heading for an 11th consecutive annual gain, this week’s declines mean it is also poised for its first quarterly drop in three years.
Hedge funds and other money managers boosted bets on higher futures prices by 3.5 percent to 151,347 contracts in the week ended Dec. 6, the first gain in three weeks, U.S. Commodity Futures Trading Commission data show. Prices declined 4 percent in the week through Dec. 13 and dropped another 5.6 percent since then. The CFTC will announce the latest data today.
Money Managers
Gold may drop below $1,500 an ounce in the “short term,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, who is forecasting an average of $1,800 next year. “Gold is not a safe haven at the moment,” he said.
The metal plunged as much as 20 percent in the three weeks through Sept. 26 as investors sold to cover their losses elsewhere, before rebounding as much as 18 percent in the following six weeks. The September plunge halted at the metal’s 200-day moving average. Two days ago, gold closed below that measure for the first time since January 2009.
That move means prices may tumble to $1,400 “in a hurry,” said Dave Lutz, head of exchange-traded-fund trading and strategy at Stifel Nicolaus & Co. in Baltimore. Gold may drop to $1,550 before rallying to as high as $2,400 in the second half of next year, Citigroup Inc.’s CitiFX Technicals predicted in a report Dec. 14. For the latest updates on the stock market, visit Stock Market Today For the latest updates PRESS CTR + D or visit Stock Market news Today
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