Gold Rebounds With Silver After Worst Annual Retreats Since 1981 (Jan 2014)

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Source: Bloomberg – Gold Rebounds With Silver After Worst Annual Retreats Since 1981

Notable excerpts:

Gold rose to a two-week high in New York, rebounding from the worst year in three decades, as a drop to a six-month low was seen spurring physical purchases and prompting some investors to reverse bearish bets. Silver jumped.

Bullion slid 28 percent last year, the most since 1981, and reached $1,181.40 an ounce on Dec. 31, the lowest since a 34-month low set in June. The premium to take immediate delivery in China was at $23 an ounce today, compared with an average of $16.21 in December and $18.72 for all of last year, data compiled by Bloomberg show.

Gold ended a 12-year bull run and assets in bullion-backed exchange-traded products shrank for the first time since the first fund was introduced in 2003 as investors lost faith in the metal as a store of value. U.S. data on Dec. 31 showed consumer sentiment and home prices climbed, underscoring the confidence expressed by the Federal Reserve when it said it will slow bond purchases this month amid an improving economy.

“The Fed is out, that’s cleared, so with no incremental news flow on the monetary-policy front and shorts remaining elevated, we see some of that being squared and giving gold some temporary support,” said Dominic Schnider, head of commodities research at UBS AG’s wealth-management unit in Singapore. “It’s been technically difficult to break below $1,200, so it seems there is some genuine interest on the physical side.”

Bullion for February delivery rose 1.2 percent to $1,216.40 by 7:42 a.m. on the Comex in New York. Prices reached $1,228, the highest since Dec. 18, and futures trading volume was 24 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg showed. Comex trading was closed yesterday for the New Year holiday. Gold for immediate delivery gained 1.4 percent to $1,217.55 in London.

Fed Policy

Fed officials said on Dec. 18 that they will trim the bank’s monthly bond purchases to $75 billion from $85 billion. The central bank will probably reduce the buying in $10 billion increments before ending the program in December 2014, according to economists surveyed by Bloomberg last month.

Short positions, which are bets on lower prices, jumped almost fourfold from October to Dec. 24, the latest U.S. Commodity Futures Trading Commission data show.

While holdings in bullion-backed ETPs tracked by Bloomberg contracted 33 percent in 2013, the U.S. Mint sold 14 percent more American Eagle gold coins last year and sales at the Perth Mint in Australia increased 41 percent. China has probably overtaken India as the biggest gold user, the World Gold Council said last year.

Silver futures for March delivery gained 2.8 percent to $19.92 an ounce in New York. Prices reached $18.72 on Dec. 31, the lowest since July, and slid 36 percent last year for the biggest loss since 1981.

Platinum for April delivery rose 1.2 percent to $1,389.70 an ounce, rebounding from last year’s 11 percent drop. Palladium futures for March delivery climbed 0.5 percent to $721.95 an ounce. It added 2.1 percent last year.

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