Gold traders are the most bearish in three-and-a-half years after prices fell to the lowest since 2010, following US Federal Reserve Chairman Ben Bernanke’s comments that the central bank may start curbing stimulus.
Fifteen analysts surveyed by Bloomberg expect prices to fall next week, with six bullish and five neutral, the largest proportion of bears since January 2010.
The metal fell below US$1,300 an ounce for the first time since September 2010 on Thursday. Investors sold 520.7 tonnes valued at about US$21.7 billion from exchange-traded products (ETPs) this year.
Gold as much as doubled since 2008, as quantitative easing swelled the Fed’s balance sheet to a record US$3.41 trillion.
Bernanke said on Wednesday that the central bank may start reducing the US$85 billion in monthly debt-buying this year and end the program next year.
The bullion is heading for its first annual drop since 2000 after some investors lost faith in the metal as a store of value.
“The comments by the Fed are really the last signal for the soft hands that the bull market in gold is ending,” said Frederique Dubrion, the Geneva-based president and chief investment officer of Blue Star Advisors SA, which manages metals and energy assets. “One of the appeals of gold, especially since 2008, was because of quantitative easing. That they are going to slow down the pace of purchasing is not a good signal for gold.”
The metal reached US$1,269.46 in London yesterday, the lowest since September 2010. This year’s 22 percent slump to US$1,300.20 is set to be the worst since 1981.
The 2,111.2 tonnes of bullion held through ETPs is the lowest since March 2011, data compiled by Bloomberg show. Billionaire John Paulson, the biggest investor in the SPDR Gold Trust, the largest gold ETP, had a 13 percent loss in his Gold Fund last month.
The slump also hurt Newcrest Mining Ltd, Australia’s top gold producer, which said this month it would write down the value of its assets by as much as A$6 billion (US$5.5 billion).
Investors are dumping gold because the unprecedented money-printing by central banks around the world that pushed US equities to a record last month has so far failed to spur inflation.
Expectations for increases in consumer prices, as measured by the break-even rate for 10-year Treasury Inflation Protected Securities, fell 18 percent this year, reaching a 17-month low last week.
“The sell-off from the Fed’s announcement, as well as recent declines on concern about an impending Fed easing of stimulus, is overdone,” said Adrian Day, who manages about US$135 million of assets as the president of Adrian Day Asset Management in Annapolis, Maryland. “Monetary policy globally remains very accommodative.”
Gold may drop to US$1,250 in a month, UBS AG wrote in a report on Thursday, while Ric Deverell, head of commodities research at Credit Suisse Group AG, said prices would probably fall to about US$1,100 in a year.
Nouriel Roubini, professor of economics and international business at New York University, has forecast a decline toward US$1,000 by 2015.
The metal reached a record US$1,921.15 in September 2011.