Gold May Drop as Investors Sell on Rise to Record, Survey Shows

Gold may decline as some investors sell after the metal’s rally to a record and as other commodities drop, a survey found.

Eight of 18 traders, investors and analysts surveyed by Bloomberg, or 44 percent, said bullion will fall next week. Seven predicted higher prices and three were neutral. Gold for June delivery was down 4.5 percent for this week at $1,485.70 an ounce by 11:30 a.m. yesterday on the Comex in New York. It reached a record $1,577.40 on May 2.

Bullion gained for six consecutive weeks as it advanced to a record on demand for a hedge against rising inflation and an alternative to a weakening dollar. Gold prices slipped this week as silver plunged after Comex owner CME Group Ltd. raised margin requirements and as industrial metals and crude oil declined.

“This market has risen too far, too fast,” said Jim Pogoda, an investor in Summit, New Jersey, and a former precious-metals trader for Mitsubishi International Corp. “I think we’ll get a more significant pullback over the next few weeks, as I expect many speculative longs that contributed to the frenzy to exit.”

The attached chart tracks the results of the Bloomberg survey, with the red bars derived by subtracting bearish forecasts from bullish estimates. Readings below zero signal that most respondents expect a decline. The green line shows the gold price. The data are as of April 29.

The weekly gold survey, that started almost seven years ago, has forecast prices accurately in 208 of 361 weeks, or 58 percent of the time.

This week’s survey results: Bullish; 7 Bearish; 8 Neutral: 3.

(Source: http://www.bloomberg.com/news/2011-05-05/gold-may-drop-as-investors-sell-on-rise-to-record-survey-shows.html)