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Gold Traders Extend Bullish Streak As Debt Crisis Deepens

By on June 29, 2012

Gold traders are bullish for a sixth week on speculation that Europe’s debt crisis will boost demand from investors seeking to protect their wealth and drive prices higher after the biggest quarterly slump in eight years.

Sixteen analysts surveyed by Bloomberg said they expect a rally next week and 10 were bearish. Another five were neutral. Investors added about $1.9 billion to holdings in gold-backed exchange-traded products this month, the most since November, according to data compiled by Bloomberg. Hedge funds and other speculators have increased bets on a rally for four consecutive weeks, U.S. Commodity Futures Trading Commission data show.

Euro-area leaders agreed today to ease repayment rules for emergency loans to Spanish banks and relax conditions on potential help for Italy. Spain had formally asked for a bailout for its banks on June 25. Gold fell to within 1 percentage point of a bear market in May as some investors sold bullion to cover losses in stock markets as $7 trillion was wiped off the value of equities in about two months.

“While demand has been weaker for bullion in recent months, it has picked up in the last month,” said Mark O’Byrne, the executive director of Dublin-based GoldCore Ltd., a brokerage that sells and stores everything from quarter-ounce British Sovereigns to 400-ounce bars. “A resolution to the crisis is not going to be seen in the short term. A lot more speculators could pile back into the market.”

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