Bloomberg: Gold Traders Most Bullish in Month on Debt Crisis

[Unobtanium]

http://www.bloomberg.com/news/2011-...onth-on-european-debt-crisis-commodities.html

Gold Traders Most Bullish in Month on Debt Crisis: Commodities.....
Gold traders are more bullish as investors buy metal at the fastest pace in a year to protect their wealth from Europe’s escalating debt crisis.

Eighteen of 26 surveyed by Bloomberg expect the metal to advance next week, the highest proportion since Nov. 11. Holdings in exchange-traded products backed by gold rose 108.5 metric tons to a record from the start of October, the most since the second quarter of 2010, data compiled by Bloomberg show. The extra bullion is valued at $5.99 billion.

Investors are now making a $130.2 billion bet on gold as European leaders meet in Brussels to seek ways to tackle the crisis that means Germany and France are under threat of losing their AAA rating from Standard & Poor’s. The European Central Bank yesterday cut interest rates for a second consecutive month to shore up growth, increasing the appeal of gold, which earns investors returns through price gains.

“People are buying out of concern, out of fear,” said Mark O’Byrne, executive director of Dublin-based GoldCore Ltd., a brokerage that sells everything from quarter-ounce British Sovereigns to 400-ounce bars. Central banks “are all pursuing extremely loose monetary policies and we still have negative real interest rates. That makes gold attractive.”

Bullion rose 21 percent to $1,718.30 an ounce this year on the Comex in New York, and reached a record $1,923.70 in September. The Standard & Poor’s GSCI gauge of 24 commodities rose 2.1 percent and the MSCI All-Country World Index of equities retreated 9.8 percent. Treasuries returned 9.3 percent, a Bank of America Corp. index shows.
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Investors held a record 2,358.2 tons of bullion through ETPs on Dec. 6, and bought 84.8 tons last month, the most since July. The combined tonnage is 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.

Growth in the euro region will drop to 1.1 percent next year, from 1.6 percent this year, the International Monetary Fund forecasts. The ECB lowered its benchmark interest rate by 0.25 percentage point to 1 percent yesterday to match a record low. Bullion rose 3.6 percent in three days after the bank cut rates by the same amount on Nov. 3.

Unlimited Cash
The ECB also said it would offer banks unlimited cash for three years and loosened the collateral criteria it imposes when lending by making credit claims such as bank loans eligible and reducing the rating threshold on asset-backed securities.

Gold bar and coin demand in Europe more than doubled to 118.1 tons in the third quarter from a year earlier, data from the London-based World Gold Council show. European Union clients opened a record number of accounts with GoldCore last week and that may be exceeded this week, O’Byrne said.

Central banks are adding to their gold reserves for the first time in a generation. South Korea said last week it bought 15 tons in November to diversify its foreign-exchange reserves. The World Gold Council expects central banks to buy as much as 450 tons this year. Official holdings stand at 30,708 tons, data from the council show.

The banks were also buying gold in 1980 as prices rose to a then-record $850, only to drop for most of the next 20 years. Bullion tripled from 1999 through the beginning of 2008 as the banks sold more than 4,000 tons.

Global Equities
Increasing optimism that European leaders would find a way of containing the debt crisis spurred investors to add $2.56 trillion to the value of global equities since Nov. 26, according to data compiled by Bloomberg. A reversal of that sentiment would also be a threat to gold. The metal fell 5.6 percent in the two weeks through Nov. 25 as stocks declined 9 percent, with investors selling the metal to cover their losses.

“If there is no agreement at all, this could put pressure on the equities and commodities and might drag gold down,” said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt.

Hedge funds and other money managers are paring bullish bets. Speculators cut their net-long position by 15 percent from a two-month high to 146,298 futures and options contracts in the two weeks to Nov. 29, data from the Commodity Futures Trading Commission show. Goldman Sachs Group Inc. said Dec. 1 it expects gold to trade at $1,940 in 12 months, 13 percent more than now.

Twelve of 26 traders and analysts surveyed by Bloomberg expect copper to fall next week, and five were neutral. The metal for delivery in three months, the London Metal Exchange’s benchmark contract, declined 18 percent to $7,835.50 a ton this year.

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Gold survey results: Bullish: 18 Bearish: 2 Hold: 6
Copper survey results: Bullish: 9 Bearish: 12 Hold: 5
Corn survey results: Bullish: 13 Bearish: 8 Hold: 4
Soybean survey results: Bullish: 14 Bearish: 10 Hold: 2
Raw sugar survey results: Bullish: 2 Bearish: 7 Hold: 1
White sugar survey results: Bullish: 2 Bearish: 8 Hold: 0
White sugar premium results: Widen: 4 Narrow: 4 Neutral: 2
To contact the reporter on this story: Nicholas Larkin in London at ...

 

[DCFusor]

Well, Bloomberg isn't always right, and neither are traders. As a contrarian at times, the theory is that when everyone who likes something is "all in" - the first guy to sell triggers a downward avalanche - no new buyers, as everyone who would is all in, already. That drives the price down, triggers more selling, and the cycle does its thing once again. Everyone being bullish is therefore a bearish indicator.

Stinks, doesn't it? But this pattern repeats over and over and people never seem to learn.

Blood in the streets soon - it'll be time to buy.

 

[DoChenRollingBearing]

It is quite normal for gold to go down just after I buy, so wait until Thursday before you guys buy...! No it´s true, it is a fact, even if statistically improbable that gold goes down right away some 80% or more of the time after I buy it.

In my case, I BTFS! But, it´s worked out OK over the decades...

and

 

[DCFusor]

Right on, Bearing. It'll work out for the patient ones.

 

[Unobtanium]

It is quite normal for gold to go down just after I buy, so wait until Thursday before you guys buy...! No it´s true, it is a fact, even if statistically improbable that gold goes down right away some 80% or more of the time after I buy it.

In my case, I BTFS! But, it´s worked out OK over the decades...

and

Thanks for the "after Thursday" insider's buying tip, DoChen! Seriously though, it seems to happen to all of us, doesn't it?

But the great thing is that whether it goes up a little or down a little right after you buy, you still win. Like someone recently said on this forum (rephrased) -

Buying precious metals: You get to spend AND save at the same time.

 

[pmbug]

I'm long-medium term bullish on physical metal, short-medium term bearish on paper metal.

 

[DCFusor]

What's interesting is that I recently heard a report on BBurg that Chinese gold buying was at record levels, yet gold is going down - that's a prime indicator of a bear market, when good news has no effect. I tend to think it's transitory (the real meaning, not the bernanke's), and think someone is just having to sell a lot to raise "money" or meet margin calls.

But a good sized dip shakes out a lot of people, and "once burned, twice shy" if it's big enough, so it takes awhile for the enthusiasm to return to the market.

The reason I think this is temporary is the inevitability of more printing - devaluation is just about the only way to destroy debt in nominal terms, and that's been known for quite awhile - they're just boiling the frog here I think. Because any other way of destroying debt that in truth cannot be paid sets a precedent that the banksters are more afraid of than torture and death...markdowns on principle won't happen short of a world war or similar. So they really have no other way but to pay it all back in worthless currency, thus, the currency must be rendered worthless. But they can play cat and mouse longer than you can remain solvent, so watch your back out there.

 

[dontdeBasemebro]

What's interesting is that I recently heard a report on BBurg that Chinese gold buying was at record levels, yet gold is going down - that's a prime indicator of a bear market, when good news has no effect. I tend to think it's transitory (the real meaning, not the bernanke's), and think someone is just having to sell a lot to raise "money" or meet margin calls.

But a good sized dip shakes out a lot of people, and "once burned, twice shy" if it's big enough, so it takes awhile for the enthusiasm to return to the market.

The reason I think this is temporary is the inevitability of more printing - devaluation is just about the only way to destroy debt in nominal terms, and that's been known for quite awhile - they're just boiling the frog here I think. Because any other way of destroying debt that in truth cannot be paid sets a precedent that the banksters are more afraid of than torture and death...markdowns on principle won't happen short of a world war or similar. So they really have no other way but to pay it all back in worthless currency, thus, the currency must be rendered worthless. But they can play cat and mouse longer than you can remain solvent, so watch your back out there.

Agreed, they have one tool and one tool only - more printing. The question is when and how much. I think that those in power want a hard drop before announcing another round of printing so that the resulting spike in metals doesn't draw as much attention as it would if everything where hitting record highs.

Those of weaker constitutions, more faith in fiat, and love for the status quo may get shaken out, but these are the times when we will thrive. The lower it goes the happier I get because it means I can stack that much more before the inevitable skyrocket happens.