Tuesday, January 7, 2014

Physical demand gave the golden push to the yellow metal

Gold is the most bullish in a year on speculation that investors are reducing near-record bearish bets after the biggest plunge in prices since 1981. Short positions held by hedge funds and other large speculators jumped almost fourfold from October to December 24 as the bear market deepened the latest U.S. Commodity Futures Trading Commission data show. Prices rebounded as much as 5.4% since slumping to a six-month low on December 31. Gold retreated for the first time in 13 years in 2013 as an improving economy spurred speculation the Federal Reserve would curb stimulus. More than $73.4 billion was erased from the value of gold-backed funds as some investors lost faith in the metal as a store of value. Bullion rallied as much as 21% in two months through August as traders cut short positions and prices that slipped to a 34-month low in June boosted demand for jewelry, coins and bars.

Bullion rose to near a three-week high of $1,246.46 an ounce today, rebounding from last year’s 28% slide. Bullion slipped the past four months and reached $1,182.27 on December 31, within 0.1% of the June low, and it rebounded since then as some investors closed out bearish wagers, and as physical buyers viewed prices near $1,200 as attractive. The U.S. Mint sold 56K ounces of American eagle gold coins in December, the most since June and contributing to a 14% gain in annual sales, data shown on its website. Australia’s Perth Mint sold 41% more gold in 2013 and Turkey’s imports climbed 64% last month to the highest since July, data on the Istanbul Gold Exchange’s website show.

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