Gold Bulls Weakest in Month as Investors Buy Dollar

By Nicholas Larkin
Bloomberg
May. 11, 2012

Gold traders are the least bullish in five weeks after the metal erased almost all of this year’s gains, as political turmoil in Europe and mounting optimism about the U.S. economy drives investors to favor the dollar.

Fourteen of 32 analysts surveyed by Bloomberg expect prices to gain next week and six were neutral, the lowest proportion since April 6. Bullion futures slid to a four-month low of $1,572 an ounce today and hedge funds are making their smallest bet on a rally in about three years, Commodity Futures Trading Commission data show.

The Dollar Index, a measure against six major counterparts, rose for nine consecutive days through yesterday, the longest winning streak since August 2008. Gold fell on seven of those days, a sign that investors are favoring the currency over the metal to protect their wealth amid concern that Greece may have to leave the euro. The U.S. economy will accelerate this quarter and in the following three months, according to the mean of 72 economists surveyed by Bloomberg.

“When the market gets very nervous, then they buy dollars and gold finds it difficult to rally,” said Jesper Dannesboe, an analyst at Societe Generale SA in London. “Given what’s going on in the markets at the moment, any rally will probably just be a bounce before another setback.”

Read More