(To get alerts for Commodities columns: SALT CMMKT. For more on the gold market, see EXT5.)
Sept. 27 (Bloomberg) -- Gold analysts are bullish for a second week on speculation that continued U.S. stimulus at a time when budget talks risk a government shutdown will spur demand for bullion as a haven.
Seventeen analysts surveyed by Bloomberg expect prices to rise next week, seven are bearish and three neutral. Gold, which fell into a bear market in April, rose 8.5 percent since the start of July, poised for the first quarterly advance in a year.
Bullion is still heading for its first annual drop in 13 years after some investors lost faith in the metal as a store of value. The Federal Reserve unexpectedly left its bond-purchase program unchanged last week, saying that restrictive fiscal policies pose risks for the economy. President Barack Obama and congressional Republicans are debating the federal budget in a confrontation that risks a government shutdown within days.
“The outlook is positive due to the twin risks of continued ultra-loose monetary policies as seen in the lack of tapering and also due to forthcoming risks regarding the U.S. debt ceiling,” said Mark O’Byrne, the executive director of Dublin-based GoldCore Ltd., a brokerage that sells and stores bullion coins and bars. “They may resolve the debt ceiling, but how they resolve it is most likely to kick the can down the road. People may buy gold as a safe haven.”
The metal fell 20 percent to $1,339.52 an ounce in London this year, and is trading 30 percent below the record of $1,921.15 set in September 2011. The Standard & Poor’s GSCI gauge of 24 commodities dropped 1.2 percent this year and the MSCI All-Country World Index of equities gained 13 percent. The Bloomberg U.S. Treasury Bond Index lost 2.5 percent.
The U.S. government’s fiscal year ends Sept. 30 and the White House and Congress still haven’t agreed on funding federal operations beyond that. Republicans are trying to tie a budget resolution to stripping funding for Obama’s health-care law, while the president and Democrats insist they won’t let that happen. The Treasury Department says the country’s $16.7 trillion borrowing limit will be reached by Oct. 17.
The Fed’s Sept. 18 decision to maintain bond buying surprised analysts, who predicted a $5 billion reduction in purchases. Fed Chairman Ben S. Bernanke said he was concerned that market interest rates, driven higher by his own suggestion he would scale back stimulus, would curb growth. Bullion rose 70 percent from December 2008 to June 2011 as the Fed pumped more than $2 trillion into the financial system by buying debt.
St. Louis Fed President James Bullard said Sept. 20 that the central bank may make a small cut to its purchases next month. Fed Bank of New York President William C. Dudley said the U.S. has yet to show any meaningful pickup. Twenty-four of 41 economists surveyed by Bloomberg on Sept. 18-19 said the Fed will take the first step in slowing debt purchases in December.
While Goldman Sachs Group Inc. analysts said in a Sept. 18 report that gold could gain further in the near term, it restated a prediction that prices will resume a drop into 2014 as U.S. economic growth gains and monetary policy is tightened. The bank forecasts $1,050 at the end of next year. Credit Suisse Group AG is bearish in the medium term and has a “gut feel” to sell near $1,350 to $1,355, it wrote in a Sept. 25 report.
Hedge funds and other large speculators cut bets on gains by 31 percent from a seven-month high set Sept. 3, U.S. Commodity Futures Trading Commission data show. The net-long position dropped 17 percent to 70,113 contracts in the week ended Sept. 17 as long wagers fell to the fewest since June and short bets rose 21 percent.
More than $58 billion was erased from the value of gold- backed exchange-traded product holdings this year as investors sold 696.9 metric tons from the funds, with assets reaching a three-year low of 1,932.4 tons on Sept. 23, data compiled by Bloomberg show. John Paulson, the billionaire hedge fund manager and biggest investor in the SPDR Gold Trust, the largest gold ETP, cut his stake in the product by 53 percent in the second quarter, a government filing showed.
Physical demand from Asia remains subdued and prices probably won’t gain much unless the buying returns, VTB Capital, a unit of Russia’s second-largest lender, wrote in a report yesterday. While the 13,000 ounces of American Eagle gold coins sold by the U.S. Mint this month exceeds August’s total of 11,500, it’s down from 50,500 ounces in July and as much as 209,500 ounces in April, data on its website show.
Russia added about 12.7 tons of bullion to reserves in August and Kazakhstan purchased 2.5 tons, International Monetary Fund data show. Azerbaijan and Ukraine also expanded holdings last month. Nations added almost 535 tons to reserves last year, the most since 1964, and may buy a further 350 tons this year, the London-based World Gold Council estimates.
Nine of 15 people surveyed expect raw sugar to climb next week and five were bearish. The commodity slid 8.7 percent to 17.82 cents a pound on ICE Futures U.S. in New York this year.
Eight of 23 people surveyed anticipate higher corn prices and eight said the grain will fall, while 10 of 23 said soybeans will rise and nine expect lower prices. Fourteen predicted gains in wheat and six were bearish. Corn fell 35 percent to $4.5475 a bushel this year in Chicago. Soybeans dropped 6.3 percent to $13.20 a bushel, as wheat slid 12 percent to $6.82 a bushel.
Seven traders and analysts surveyed expect copper to fall next week, six were bullish and 10 neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, dropped 8.1 percent to $7,292.50 a ton this year.
The S&P GSCI gauge of raw materials rose 4.5 percent this quarter, set for the best performance in a year. A supply surge and slowing growth in China prompted Goldman Sachs and Citigroup Inc. to say the commodities super cycle is over. Demand from emerging markets means it’s premature to talk about the death of the longer-than-average period of rising prices, McKinsey & Co., a consultant, said in a report yesterday.
“There’s a generalization that everything’s over because things are slowing down,” said Jeremy Baker, a senior commodities strategist who helps oversee about $700 million of assets at Harcourt Investment Consulting AG in Zurich. “What we’re having is an economic or a business cycle. The next couple of years could be challenging for some of the metals, but after that you’ll have a combination of relatively good growth outlook and a weaker supply outlook.”
Gold survey results: Bullish: 17 Bearish: 7 Hold: 3
Copper survey results: Bullish: 6 Bearish: 7 Hold: 10
Corn survey results: Bullish: 8 Bearish: 8 Hold: 7
Soybean survey results: Bullish: 10 Bearish: 9 Hold: 4
Wheat survey results: Bullish: 14 Bearish: 6 Hold: 2
Raw sugar survey results: Bullish: 9 Bearish: 5 Hold: 1
White sugar survey results: Bullish: 9 Bearish: 4 Hold: 2
White sugar premium results: Widen: 4 Narrow: 6 Neutral: 5
--With assistance from Agnieszka Troszkiewicz and Isis Almeida in London, Glenys Sim and Luzi Ann Javier in Singapore, Alfred Cang in Shanghai, Jae Hur in Tokyo, Phoebe Sedgman in Wellington, Jeff Wilson in Chicago and Marvin G. Perez in New York. Editors: John Deane, Sharon Lindores