Goldman Stays Gold Bear as Bullish Wagers Increase – Bloomberg 07-14-14

Salient to Investors:

  • Jeffrey Currie at Goldman Sachs predicts gold to fall to $1,050 by year-end as the economy improves and there is more confidence in the recovery, without significant inflationary concerns. Goldman predicts higher interest rates in Q3, 2015.
  • Last week, net-long positions in gold rose to their highest level since November 2012, while short holdings fell for the 5th straight week. Hedge funds increased gold holdings for the 5th straight week.
  • Michael Haigh at Societe Generale sees a drop to $1,245 by Q4.
  • George Gero at RBC Capital Markets sees too many bears despite gold climbing and says geopolitical tensions and economic surprises are attracting more investors.
  • Jack Ablin at BMO Private Bank said supplies have rebounded so quickly that people are now more comfortable about the global crop situation.

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Worst Raw-Material Slump Since ’08 Seen Deepening: Commodities – Bloomberg 12-01-13

Salient to Investors:

History suggests the commodity slump will deepen by the end of December as prices head for their first annual loss since 2008.

Since 1971, the S&P GSCI Spot Index fell in December 83 percent of the time whenever it was losing for the year through November.

EPFR Global reports investors pulled $34.1 billion from commodity funds since the end of December 2012, a record since tracking the flows in 2000.  Economists expect China to slow for a third year in 2013.

Michael Cuggino at Permanent Portfolio Family of Funds said the trend lower will hold through the end of the year as investors see anemic or slowing economic growth in developed and emerging-market economies amid more supply on hand.

Jeffrey Currie at Goldman Sachs sees significant declines through next year for iron ore, gold (to $1,045 by year-end 2014), soybeans and copper as the supercycle of rising prices is eclipsed by more supply. Citigroup and Credit Suisse are bearish.

Goldman Sachs forecast in October that the S&P GSCI Enhanced Commodity Index will be 0.7 percent lower in 12 months, led by precious metals expected drop of 17 percent and agricultural products expected drop of 8.1 percent.

Michael Haigh et al at Societe Generale sees signs of a rebound in global growth and gains in developing economies supporting demand for raw materials, and said investors have become excessively pessimistic on industrial metals because prices are below output costs for some producers.

Economists predict the global economy to grow 2.8 percent in 2014, the most since 2011.

4 of 5 investors expect the Fed to delay tapering until March 2014 or later.

Catherine Raw at BlackRock Commodity Strategies Fund said less fear about the global economy moving into 2014 is positive for commodity demand.

Citigroup said China’s move away from infrastructure expansion may mean less demand for raw materials. The mean economist expects China to slow from 7.7 percent in 2012 to 7.6 percent in 2013, 7.5 percent in 2014 and 7.2 percent in 2015.

Wagers by hedge funds et al have slumped 27 percent since the end of December 2013, and are net-short for corn, copper, coffee, wheat, soybean oil, natural gas and ultra-low-sulfur diesel.

Global holdings in gold ETPs have tumbled 30 percent in 2013 to the lowest since March 2010.

Barclays predicts copper supply will outpace demand by 407,000 metric tons this quarter, versus a 636,000-ton shortfall in the previous six months, while 2014’s surplus will total 193,000 tons, versus from a 63,000-ton deficit in 2013.

Jack Ablin at BMO Private Bank  said supply and demand imbalances have been really fueling huge stockpiles in Chicago, and does not see many signals of an upturn in commodities yet.

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Hedge Funds Reduced Bullish Gold Bets Before Rally: Commodities – Bloomberg 09-22-13

Salient to Investors:

Hedge funds et al cut long contracts to the lowest since June 25. EPFR Global said money managers added the most since October 2012 to gold funds last week, while inflows for commodity funds were the most since November 2012. Evestment said assets managed by commodity hedge funds have fallen 5 percent since the end of 2012.

Michael Mullaney at Fiduciary Trust said the Fed factor has been taken off the table for now, which will be bullish for gold.

Goldman Sachs said last week’s Fed decision the debt ceiling debate leaves risks to gold prices as skewed to the upside in the near term, and restated that gold will resume a drop into 2014.

Societe Generale forecasts gold will average $1,225 in Q4 and says the rally is an opportunity to sell.

Jack Ablin at BMO Private Bank said the Fed’s latest move doesn’t change the longer-term picture, and anyone who believes the Fed cannot keep doing this forever should also believe that gold can’t keep running at this pace forever. Ablin said that unless fundamentals catch up, we are due for a pullback in many assets, particularly gold.

Peter Jankovskis at Oakbrook Investments said the market understands the Fed decided not to taper because they are concerned about the US growth, a negative for commodities so we have not yet totally turned the corner.

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Hedge Funds Most Bearish Ever on Copper, Favor Gold: Commodities – Bloomberg 03-25-13

Salient to Investors:

Hedge funds are making the biggest bet against copper on record as global inventories expand to a 9-year high, while concern that Europe’s debt crisis will spread spurred the biggest gain in gold bets since 2008.

Jack Ablin at BMO Private Bank cites unprecedented stockpiles of copper and other metals amid tepid demand and slow global growth.

Walter ‘Bucky’ Hellwig at BB&T Wealth Mgmt said copper flows show there are still doubts about global growth.

Rachel Zhang at Morgan Stanley said sales of air conditioners and orders for electrical equipment suggest improving demand in China.

Cameron Brandt at EPFR Global said investors withdrew a net $929 million from commodity funds last week, and  $978 million from gold and precious metals.

Gold investors increased their bullish bets by the most since September 2008.

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Dow Average Rises to Five-Year High on Economic Reports – Bloomberg 01-17-13

Salient to Investors:

Jack Ablin at BMO Private Bank said the economic head start helps build a nice story for 2013.

71 percent of the 52 S&P 500 companies so far reported have beat analysts forecasts.

Laszlo Birinyi said he purchased options to bet the S&P 500 will rise more than 8 percent by the end of 2013 as more investors are attracted to the rally. Birinyi said the last phase of the bull market is very strong.

 EPFR Global report investors added a record $3.1 billion into US equity mutual funds in the first week of January versus withdrawal of $250 billion over the last 4 years.

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Hedge Funds Cut Bullish Bets to Lowest Since June: Commodities – Bloomberg 12-31-12

Salient to Investors:

Hedge funds et al reduced net-long positions across 18 US futures and options last week to the lowest since June 19. Gold holdings reached a 4-month low, copper holding dropped for the first time in five weeks, and investors were the most bearish on natural gas since May.

Walter Hellwig at BB&T Wealth Mgmt says it’s easier to sit on the sidelines or go short because of the lack of sustained, healthy global growth.

Evan Smith at US Global Investors says increasing government and central bank stimulus measures will bolster commodity demand.

The median economist expects China to snap a 7-quarter slowdown as growth accelerates to 7.8 percent in Q4 2012 and keep accelerating for at least the next six months.

Chad Morganlander at Stifel Nicolaus said the Chinese slowdown has reversed and global growth expectations will slowly improve in Q2 and Q3 2013, ginning up commodity prices.

Cameron Brandt at EPFR Global said money managers withdrew $188 million from commodity funds last week  and $451 million from gold and precious-metal funds.

Jack Ablin at BMO Private Bank said commodities are caught in a risk-asset slide.

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Goldman Bullish With Hedge Funds Amid Citi Warning: Commodities – Bloomberg 12-18-12

Salient to Investors:

EPFR Global said the increase in inflows into commodity funds in 2012 was 92 percent higher than the increase in 2011. The S&P GSCI, of which energy comprises 70 percent, fell 0.9 percent in 2012, the MSCI All-Country World Index  rose 13 percent, the Dollar Index fell 0.9 percent, Treasuries returned 2.3 percent. Barclays says commodity assets under management rose 8.6 percent in the first 10 months of 2012, gold-backed ETP holdings rose 12 percent.

Hedge funds’ reduced bullish bets in Q4 2012, which are 51 percent higher than a year ago. 131 traders, investors and analysts expect precious metals to rise as much as 25 percent in 2013, grains to rise 18 percent, and industrial metals to rise 16 percent, and other commodities at least 9.9 percent.

Edward Morse at Citigroup says price rises in 9 of the past 10 years are creating supply gluts. Citigroup says the super cycle of returns has ended because China is growing more slowly and supply has caught up. Citigroup sees grain and soybean prices being supported in half1 2013 by tight supplies.

Barclays and Rabobank Intl say output will exceed demand next year in 10 commodities.

Goldman Sachs expects gold to peak in 2013 due to rising U.S. growth. Jeffrey Currie at Goldman Sachs says accelerating economic growth in half2 2013 will increase demand, and sees a 7 percent return in commodities over 12 months. Currie says increasing consumption will curb available supply, boost near-term prices relative to longer-dated contracts.

Peter Jankovskis at Oakbrook Investments said the disparity in outlooks is due to uncertainty about the economy and government policies over the next year.

Hussein Allidina and Peter Richardson at Morgan Stanley say demand for energy and grains will be resilient and delayed harvests in South America will limit corn and soybean supplies, while economies will accelerate in half2 2013 if central banks extend stimulus. Morgan Stanley said central-bank stimulus will cause investors to continue to buy gold, which will average $1,853 an ounce in 2013,

Jack Ablin at BMO Private Bank said commodities tend to be victims of their own success – we have unprecedented inventories in industrial metals.

The IMF expects world growth to rise to 3.6 percent in 2013. The median economist expects China to accelerate in Q4.

James Paulsen at Wells Capital Mgmt says there’s a good undertow for commodities, which will trend higher the next few years.

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S&P 500 Futures Gain as German Business Confidence Rises – Bloomberg 11-23-12

Salient to Investors:

Jack Ablin at BMO Harris Private Bank said the outperformance of 3 upscale retailers versus 3 lower scale retailers indicates investors believe high-income households will fund their higher tax burden from savings, rather than by cutting spending.

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