News

Gold traders turned bearish for thefirst time in a month as investors reduced holdings in exchange-traded products for an unprecedented 17th consecutive week and India, the biggest buyer, announced curbs on imports.

Eighteen analysts surveyed by Bloomberg expect prices tofall next week, with 14 bullish and four neutral, the largestproportion of bears since May 17. Investors sold 497.2 metrictons valued at about $22 billion through ETPs since Feb. 8 andthe 2,117.96 tons left is the least they have held since March2011, data compiled by Bloomberg show.

Bullion is on track for the first annual drop since 2000 assome investors lose faith in it as a store of value. While theslump into a bear market in April hurt billionaire hedge fundmanager John Paulson and producer Newcrest Mining Ltd. (NCM), itspurred purchases of coins and jewelry worldwide. That demandmay be threatened in India after the nation raised gold import taxes to contain a record current-account deficit.

“Sentiment is very bleak,” said Andrey Kryuchenkov, acommodity strategist in London at VTB Capital, a unit ofRussia’s second-largest lender. “The Indian import tax hike isconcerning and it’s obviously not helping sentiment. Investorsare basically on the sidelines. They don’t want to do anythingand are still spooked.”

Gold Price

The metal fell 17 percent this year to $1,384.86 an ounceby 12:55 p.m. in Singapore and is trading 28 percent below therecord $1,921.15 set in September 2011. The Standard & Poor’sGSCI gauge of 24 commodities dropped 3.1 percent since the startof January and the MSCI All-Country World Index of equities rose7.2 percent. Treasuries lost 1.4 percent, a Bank of America Corp.index shows.

India raised the import duty to 8 percent from 6 percent onJune 5 and the central bank also further restricted shipments.Overseas purchases slid to an average of $36 million a day inthe 14 business days through June 7, compared with an average$135 million a day in the 13 days through May 20, Raghuram Rajan,chief economic adviser in the Finance Ministry, said June 11.The All India Gems & Jewellery Trade Association has asked thegovernment for a discussion on reversing the tax increase.

The move to slow demand comes amid the worst drop in ETPholdings since the first product was listed in 2003. Assets fellfor 17 weeks through June 7 and are down 11.2 tons so far thisweek. Paulson, the largest investor in the SPDR Gold Trust, thebiggest ETP, had a 13 percent loss in his Gold Fund last month.That takes the decline since the start of the year to 54 percent,according to a copy of a letter to investors obtained by Bloomberg News.

Write Down

Gold’s plunge is also hurting producers already contendingwith rising costs. Newcrest, Australia’s largest gold producer,said last week it will write down the value of its assets by asmuch as A$6 billion ($5.9 billion) after the slump. The 30-member Philadelphia Stock Exchange Gold and Silver Index slid 38percent this year.

Data released last week showed U.S. payrolls increased morethan forecast in May and Federal Reserve Chairman Ben S. Bernanke said last month that the central bank could curtail its$85 billion monthly bond purchases if the economy improves. TheWorld Bank raised its 2013 U.S. growth forecast on June 12 to 2percent, from 1.9 percent in January, even as it cut itsestimate for the global economy to 2.2 percent, from 2.4 percent.

U.S. Stimulus

Bullion rose 57 percent since 2008 as the Fed led a globalsurge in money printing to boost growth. While the U.S. centralbank will slow purchases, it will still buy $65 billion a monthby October, the median of 59 economist estimates compiled byBloomberg this month shows. The Bank of Japan restated its Aprilpledge this week to increase the monetary base by 60 trillion to70 trillion yen ($742 billion) a year, and refrained from addingextra policy tools to counter bond-market volatility.

“Global fundamentals, including accommodative monetarypolicy, remain positive for gold,” said Adrian Day, who managesabout $135 million of assets as the president of Adrian DayAsset Management in Annapolis, Maryland. “The market is slowlyrealizing that despite all the talk about tapering of bondbuying by the Fed, there will be no meaningful global tighteningany time soon.”

The surge in equities over the past three quarters, whichalso damped demand for gold, is now partially reversing. TheMSCI All-Country World Index reached a seven-week low yesterday.The U.S. Dollar Index, a measure against six currencies, slippedto the weakest in almost four months.

Money Managers

Hedge funds and other large speculators got more positivein the past two weeks after reducing bullish bets to the lowestin almost six years, U.S. Commodity Futures Trading Commissiondata show. They increased their net-long position by 60 percentto 57,113 contracts in the two weeks to June 4.

There are still signs that lower prices are boostingphysical buying. The U.K.’s Royal Mint, which saw its gold-coinsales triple in April, said last week the “steep increase” indemand continued in the past several weeks. The U.S Mintpredicted last week that its gold and silver coin sales mayreach a record in 2013, and the Austrian Mint said it expects“quite good business” in the next couple of months.

Gold’s 60-day historical volatility reached 28.9 percentyesterday, the highest since December 2011, data compiled byBloomberg show. That compares with an average of 20.6 percent inthe past five years.

In other commodities, six of 11 people surveyed expect rawsugar to drop next week and two were neutral. The commodity slid15 percent to 16.61 cents a pound on ICE Futures U.S. in New York this year.

Grain Costs

Eighteen of 30 surveyed anticipate lower corn prices andnine said the grain will gain, while 14 of 29 said soybeans willrise and 13 expect lower prices. Eighteen traders predicteddeclines in wheat and seven were bullish. Corn fell 24 percentto $5.325 a bushel this year in Chicago. The December contract,which reflects supply after the U.S. harvest, is down 11 percentthis year. Soybeans lost 7.9 percent to $12.985 a bushel, aswheat declined 13 percent to $6.7775 a bushel.

Seven traders and analysts surveyed expect copper to fallnext week, six were bullish and five were neutral. The metal fordelivery in three months, the London Metal Exchange’s benchmarkcontract, slipped 11 percent to $7,070 a ton this year.

‘Death Bells’

Citigroup Inc. said in May that this year will probablysignal “death bells” for the commodities super cycle, orlonger-than-average period of rising prices. Societe Generale SAwrote in a June 12 report that it’s too early to call a near-term end to the super cycle because of expanding populationswith more disposable income and greater urbanization.

The Washington-based World Bank cut China’s growth outlookto 7.7 percent, from 8.4 percent previously. The nation is thebiggest user of everything from copper to cotton to coal. Metalsand grains are among the worst-performing commodities this year.

“Our call has been for a bottoming in commodities pricesin the second-quarter,” said Bjarne Schieldrop, the Oslo-basedchief commodity analyst at SEB AB. “The reduced growth outlookby the World Bank is shaking that confidence a little.”

Gold survey results: Bullish: 14 Bearish: 18 Hold: 4Copper survey results: Bullish: 6 Bearish: 7 Hold: 5Corn survey results: Bullish: 9 Bearish: 18 Hold: 3Soybean survey results: Bullish: 14 Bearish: 13 Hold: 2Wheat survey results: Bullish: 7 Bearish: 18 Hold: 2Raw sugar survey results: Bullish: 3 Bearish: 6 Hold: 2White sugar survey results: Bullish: 4 Bearish: 5 Hold: 2White sugar premium results: Widen: 2 Narrow: 1 Neutral: 8