Gold traders most bullish in a year after dire end to 2016

LONDON – There’s one thing many gold traders and analysts agree on, now is a great time to own bullion.

Those surveyed by Bloomberg this week were the most bullish in a year. They cited worries over political developments in Europe, and in the US following Donald Trump’s election, as well as expectations of stronger demand ahead of the Lunar New Year. After posting the biggest quarterly drop in more than two years, prices are now heading for their best weekly performance since April.

“The eurozone has plenty of crisis triggers over coming months; Indian and Chinese buying remain strong and Trump’s policy threatens inflation,” said Adrian Day, president of Adrian Day Asset Management in Annapolis, Maryland, which oversees $190-million. “All this is positive for gold.”

Gold benefited this week as the dollar retreated from the highest in more than a decade and investors sought a haven amid doubts that Trump will usher in an era of fiscal easing and rapid growth. Bullion plunged 13% last quarter -- one of the worst performances among commodities -- on expectations that the Federal Reserve will raise borrowing costs faster than previously thought.

For a QuickTake on gold’s recent price performance, click here.

Fourteen gold analysts and traders surveyed by Bloomberg this week were positive on the outlook for prices, while two were bearish and one was neutral. Demand for gold as gifts in China normally rises before the Lunar New Year, which this year starts at the end of January.

The metal climbed 2.6% this week to $1 177.71/oz by 1:14 pm in London, near a one-month high, according to Bloomberg generic pricing. The rebound has fed through to mining stocks, with the FTSE/JSE Africa Gold Mining Index rising for the sixth time in seven sessions to the highest since November.

Analysts had been expecting higher prices, with those surveyed after the Fed raised rates in December saying prices may rally about 13% this year. Still, gold may drop below $1 100 in the coming months on positive US data, ABN Amro Bank NV said in a report this week.