(Bloomberg News) Gold traders are the most bullish in 11 weeks and investors accumulated record bullion holdings on speculation U.S. policy makers will add to stimulus following President Barack Obama's re-election.
Twenty-five of 33 analysts surveyed by Bloomberg expect prices to rise next week and three were bearish. A further five were neutral, making the proportion of bulls the highest since Aug. 24. Investors boosted assets in gold-backed exchange-traded products to an all-time high of 2,596 metric tons on Nov. 8, valued at $144.9 billion, data compiled by Bloomberg show.
Obama won the Nov. 6 election against Mitt Romney, who had criticized the Federal Reserve's policies and said he'd replace Chairman Ben S. Bernanke, whose second term expires in January 2014. The European Central Bank kept interest rates at a record low yesterday and nations from the U.S. to China have pledged more action to boost economies. Gold rose 70 percent as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 through June 2011.
"Obama is a supporter of Bernanke and his re-election means that the ultra-loose monetary and fiscal policies by the Fed will continue," said Daniel Briesemann, a commodities analyst at Commerzbank AG in Frankfurt. "More and more liquidity will be put into the system and therefore there'll be inflation fears and concern about currency devaluation."
Gold rose 11 percent to $1,737.02 an ounce in London this year, heading for a 12th straight annual gain, the longest winning streak in at least nine decades. The Standard & Poor's GSCI gauge of 24 commodities lost 1.8 percent and the MSCI All- Country World Index of equities climbed 8.1 percent. Treasuries returned 2.6 percent, a Bank of America Corp. index shows.
Bullion is heading for the first weekly gain in five as Obama was re-elected with the highest unemployment rate of any president returned to office since Franklin Roosevelt in 1936. The Fed said Oct. 24 it will maintain $40 billion in monthly purchases of mortgage debt and probably hold interest rates near zero until mid-2015.
Some investors buy bullion as a hedge against inflation and a weaker dollar, and the metal generally earns returns only through price gains, increasing its allure as interest rates decline. The Bank of Japan expanded its asset-purchase program on Oct. 30 for the second time in two months, increasing it by 11 trillion yen ($138 billion). The ECB said it's ready to buy bonds of indebted nations and China approved a $158 billion subways-to-roads construction plan.
Investors may now focus on the so-called U.S. fiscal cliff, a combination of automatic spending reductions and expiring tax cuts that amounts to $607 billion in 2013. Democrat and Republican lawmakers say they want to avoid the recession- causing cliff, though have yet to reach a compromise. That may boost gold's appeal as a protector of wealth, Commerzbank's Briesemann said.