Gold Bulls Strongest Since August in Fund Retreat

Hedge funds are cutting bets on lower prices, U.S. lawmakers continue to debate as the deadline for budget talks grows close, and gold traders are the most bullish on the precious metal than they’ve been in four months.

A survey released by Bloomberg indicates that 15 of 19 analysts surveyed expect prices to rise next week and only one was bearish. The remaining three were neutral, making the number of bulls the highest in proportion since a survey released August 24.

The findings of the survey, which may not yet be reflected in the market price point, are certainly in line with physical data beyond the spot price. Investors have bought 60 percent more this year through gold-backed exchange-traded products compared with 2011, with holdings at yet another new record on December 20. Additionally, sales of gold and silver physical coin, as reported at the U.S. Mint, have been at record-breaking levels for two months with 33,742,500 ounce of American Eagle Silver Coins selling for the year, the third highest total in the coin’s 27-year history.

Bullion continues to head for a twelfth straight annual gain, which is the longest rally in the precious metal for at least nine decades. Central banks from Europe to China continue to pledge more steps to spur economic growth, which will bolster the precious metals. The U.S. fiscal cliff, in spite of the fundamentals that have driven the gold market for many years now, has caused many hedge funds that were extremely bullish on gold as recently as October to pare bets by 43 percent in the face of the $600 billion of tax increases scheduled for next month.

Thorsten Proettel, a commodities analyst at Landesbank Baden Wuerttemberg in Stuttgart, Germany, said the problems we’ve seen over the last year haven’t disappeared and there is still a lot of potential for trouble in the world and that is a good reason for people to stay in gold or buy more.

According to the London fix, gold has advanced 6.2 percent this year to $1,660.45 per troy ounce, even after the recent drops in spot price.

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