Gold traders are split on whether bullion will plunge into its first bear market since 2008 as economies improve or rally as central banks buy more debt.
Twelve analysts surveyed by Bloomberg expect prices to rise next week and the same number were bearish. A further three were neutral. Gold slumped to a 10-month low of $1,540.29 an ounce yesterday and investors sold $9.7 billion from exchange-traded products since their holdings reached a record Dec. 20. Hedge funds cut bets on higher prices by 70 percent since October.
Gold’s 12-year bull rally is probably ending as the U.S. leads a global economic recovery, according to banks from Credit Suisse Group AG to Goldman Sachs Group Inc. Commerzbank AG says it’s too early to call an end to the rally and Standard Bank Plc forecasts prices will climb this year as central-bank stimulus and record-low interest rates spur demand for a protection of wealth. The Bank of Japan said yesterday it will double monthly bond buying to bolster the economy.
“The main driver behind gold’s weakness this year has been the focus on global growth and that’s meant rotation out of defensive assets like gold,” said Joni Teves, an analyst at UBS AG in London. “There’s this weak sentiment and it’s been feeding on itself. Central banks continue to pursue exceptionally loose monetary policies and create a still supportive environment for gold.”
The metal fell 6.4 percent to $1,567.55 in London this year. A close at $1,520.18 would be a 20 percent drop from the peak reached in September 2011, the common definition of a bear market. The Standard & Poor’s GSCI gauge of 24 commodities dropped 2.8 percent this year, and the MSCI All-Country World Index (MXWD) of equities gained 4.3 percent. Treasuries are little changed, a Bank of America Corp. index shows.
Gold rose as much as 1.3 percent today after a Labor Department report showed U.S. employers hired fewer workers than forecast in March and a slump in the size of the labor force pushed the jobless rate down to a four-year low of 7.6 percent.
Bullion retreated as Federal Reserve policy makers debated the pace of $85 billion of monthly asset purchases and as U.S. equities reached a record. U.S. economic growth will accelerate from the third quarter though mid-2014, according to the median of as many as 74 economist estimates compiled by Bloomberg. The International Monetary Fund is predicting global growth of 3.5 percent in 2013, from 3.2 percent in 2012.