(BN) U.S. Stocks Rise on Consumer Confidence as Italy Approves Plan

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U.S. Stocks Rise on Consumer Confidence as Italy Approves Plan

Nov. 11 (Bloomberg) -- U.S. stocks rallied, preventing a second straight weekly drop in benchmark indexes, as American consumer confidence topped estimates and Italy's approval of debt-reduction plans eased concern about Europe's debt crisis.

All 10 groups in the Standard & Poor's 500 Index rose as 487 stocks gained. Bank of America Corp. and Citigroup Inc. increased at least 2.4 percent as financial shares advanced. Caterpillar Inc. and Alcoa Inc. climbed more than 3.4 percent to pace gains among the biggest companies. Walt Disney Co. jumped 6 percent as the largest theme-park operator reported a 30 percent gain in profit, beating analysts' projections.

The S&P 500 added 2 percent to 1,263.85 at 4 p.m. in New York. The gauge has risen 0.9 percent since Nov. 4, preventing a second weekly drop. The Dow Jones Industrial Average advanced 259.89 points, or 2.2 percent, to 12,153.68. The Russell 2000 Index of small companies gained 2.6 percent. Trading volume dropped to about 6 billion shares, the lowest since July 25, as the Treasury market was shut for Veterans Day.

"Things are starting to settle back in," Philip Orlando, the New York-based chief equity market strategist at Federated Investors Inc., said in a telephone interview. His firm oversees about $355 billion. "The expectation was that Italy and Greece were going out of business. That was overdone. We're going to see some necessary austerity measures put in place," he said. "In the U.S., the economic numbers have absolutely turned the corner and are starting to accelerate."

Stocks extended their rally as the Thomson Reuters/University of Michigan preliminary index of consumer sentiment rose to 64.2 this month, the highest since June. The median estimate of economists surveyed called for 61.5.

Italian Bond Yields

Earlier gains were driven by a drop in Italian bond yields as the nation's Senate approved budget measures in a bid to allow for a new government. In Greece, Lucas Papademos, a former vice president of the European Central Bank, was sworn in as premier of a unity government.

The Morgan Stanley Cyclical Index jumped 2.7 percent as investors became more optimistic that the global economic recovery would not be derailed by Europe's debt crisis. The Dow Jones Transportation Average added 2.8 percent, while the KBW Bank Index gained 2.1 percent.

Gauges of consumer discretionary, industrial and commodity shares in the S&P 500 had the biggest gains among 10 industries, rising more than 2.3 percent. Bank of America climbed 3 percent to $6.21, while Citigroup advanced 2.4 percent to $29.33. Caterpillar, the world's largest construction and mining- equipment maker, increased 4.3 percent to $96.13. Alcoa, the biggest U.S. aluminum producer, rose 3.4 percent to $10.60.

'Risk On'

"It's like investors hit the keystroke to risk on," Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion, said in a telephone interview. "The European situation is seemingly coming to some closure and a decent consumer confidence report brought investors to risk assets."

Walt Disney climbed 6 percent, the most in the Dow, to $36.70. Higher fees from pay-TV operators, advertising gains and improved results at resorts drove revenue and profit growth. Audience ratings for ESPN increased 13 percent in the quarter, according to Nielsen data provided by Barclays Capital. Disney resorts benefited from higher ticket prices and a new ship.

Nvidia Corp. advanced 3.5 percent to $14.98. The maker of graphics processors reported third-quarter sales and profit that topped analysts' estimates, lifted by demand for chips used by computer gamers and designers. Nvidia has been winning market share in sales of graphics processors for desktop PCs from Advanced Micro Devices Inc., according to Patrick Wang, an analyst at Evercore Partners Inc.

Single-Serve Brewers

Green Mountain Coffee Roasters Inc. rallied 6.9 percent to $43.71. The largest U.S. seller of single-serve brewers plunged 39 percent yesterday, the most ever, as sales trailed estimates. The stock before today had lost 63 percent since its peak in September amid scrutiny of its accounting practices from short sellers including David Einhorn, wiping out $11 billion of market value.

E*Trade Financial Corp. fell 4.1 percent, the most in the S&P 500, to $9.09. The board of the online brokerage rejected putting the company up for sale. Before today, the shares dropped 41 percent in 2011, more than its bigger rivals Charles Schwab Corp. and TD Ameritrade Holding Corp.

The brokerage hired Morgan Stanley in July to explore a sale and then replaced the bank with Goldman Sachs Group Inc. E*Trade, based in New York, initiated the review following a request by Citadel LLC, its biggest shareholder, to address "catastrophic losses" that have driven the shares down 96 percent since 2007.

'Strong Desire'

"A strong desire to sell was never present at E*Trade and if any offers were in fact on the table, they were not compelling enough to change that fact," Patrick O'Shaughnessy, a Chicago-based analyst at Raymond James & Associates Inc., said in a report today. "In our view, the pool of potential buyers is and always has been relatively small."

Molycorp Inc. slumped 14 percent to $33.45. The owner of the largest rare-earth deposit outside China cut its 2011 production forecast and posted third-quarter profit and revenue that missed analysts' estimates. Rare earths are 17 metals used in batteries, electric cars, wind turbines and other products.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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(BN) Pennsylvania State May Be Downgraded by Moody’s in Wake of Abuse Scandal

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Penn State Debt May Be Cut by Moody's on Child Sex-Abuse Scandal

Nov. 11 (Bloomberg) -- Penn State University had its Aa1 revenue-bond rating placed on review for possible downgrade by Moody's Investors Service amid the investigation into a child sex-abuse scandal.

Moody's said it will examine the reputational and financial risk arising from the probe, after the Penn State football team's former defensive coordinator, Jerry Sandusky, was charged with sexually assaulting eight boys from 1994 to 2009.

About $1 billion of rated debt would be affected by a downgrade, according to the statement. The company said it will take several months to monitor events, including possible lawsuits, weaker student demand, decreased philanthropic support, changes in its relationship with the state and management moves. Aa1 is Moody's second-highest rating.

"While the full impact of these increased risks will only unfold over a period of years, we will also assess the degree of near- and medium-term risks to determine whether to downgrade," Moody's said in the statement.

A Penn State revenue bond maturing in March 2030 traded Nov. 9 at an average yield of 3.65 percent, down from 4.15 percent in a trade about a month earlier, according to data compiled by Bloomberg.

Penn State, with 96,000 students and more than 500,000 alumni, raised $195.3 million last year, up from $82 million in 1995, when former President Graham B. Spanier was appointed, according to the Council for Aid to Education, which tracks gifts. Spanier and football coach Joe Paterno were fired this week.

To contact the reporters on this story: Brian Chappatta in New York at bchappatta1@bloomberg.net Greg Chang in San Francisco at gchang1@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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(BN) Bank of America Says Regulators May Limit Transfer of Merrill Derivatives

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BofA Says Regulators May Limit Transfer of Merrill Contracts

Nov. 11 (Bloomberg) -- Bank of America Corp. may be prevented by regulators from shifting derivatives contracts into the books of a deposit-taking unit, potentially forcing the lender to hand over more collateral to counterparties.

The lender has designated the retail-deposit unit, Bank of America NA, as the new counterparty on some Merrill Lynch contracts after the company's credit ratings were cut in September, it said last week in a filing. The Federal Reserve and Federal Deposit Insurance Corp. have disagreed over the moves, and they are now discussing whether to allow future transfers, according to people with knowledge of the matter.

"Our ability to substitute or make changes to these agreements to meet counterparties' requests may be subject to certain limitations, including counterparty willingness, regulatory limitations on naming Bank of America NA as the new counterparty, and the type or amount of collateral required," the lender wrote in the quarterly regulatory filing.

At stake for Bank of America is the power to curb billions of dollars in collateral payments to counterparties that could be required after a credit-rating downgrade. The company, which has lost more than half its market value this year amid rising expenses from soured mortgages, is vulnerable to further rating cuts, the bank said in the Nov. 3 regulatory filing.

Limits on moving contracts from Merrill Lynch to the deposit unit could "adversely affect" results, the Charlotte, North Carolina-based bank said in the filing. The transfers lower collateral obligations because the retail unit still has a higher rating than the Merrill Lynch subsidiary after the Sept. 21 downgrades from Moody's Investors Service.

Shifting Risk

"It's a game of 'move the risk,'" said Mark Williams, a former Federal Reserve examiner who lectures on financial-risk management at Boston University. "It makes sense for Bank of America, but the broader implication is that it makes the retail operations potentially riskier. If there is another downgrade, you have the possibility of falling off a credit cliff."

The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, people familiar with its position said Oct. 18. The FDIC, which would have to pay depositors in a failure, objected, the people said.

The other two major ratings firms, Standard & Poor's and Fitch Ratings, are re-evaluating Bank of America and may also cut its credit grades, the lender said in the quarterly filing. The full scope of damage from a credit-rating downgrade is "inherently uncertain" because it depends upon the behavior of counterparties and customers, the bank said.

Collateral Estimates

Derivatives are financial instruments used to hedge risks or for speculation. They're derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in the weather or interest rates. The contracts often require counterparties to post collateral in amounts that can increase if their creditworthiness deteriorates.

Bank of America's holding company -- the parent of both the retail bank and the Merrill Lynch unit -- held almost $75 trillion of the contracts at the end of June, according to data compiled by the Comptroller of the Currency. About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades. The company is the second-largest U.S. lender by assets.

In August, the bank said a two-level downgrade by all ratings companies would require it to post $3.3 billion in additional collateral and termination payments, based on agreements as of June 30. As of Sept. 30, counterparties were entitled to $4.9 billion beyond what the bank had posted, according to last week's filing. Of that, $3.2 billion resulted from the Moody's downgrade.

JPMorgan's Holdings

Bank of America also said the impact of further downgrades would be more severe than in previous projections. Another two- level cut could amount to $6.6 billion in collateral demands, based on Sept. 30 data, it said.

The firm held cash and securities collateral of $93 billion as of Sept. 30, and had posted $87.8 billion, about 30 percent more than the end of 2010.

Bank of America's rating is now four grades below the one Moody's assigned to JPMorgan Chase & Co., which became the biggest U.S. bank by assets this year, and a level below the rating given to Citigroup Inc., the No. 3 lender. JPMorgan's deposit-taking entity, JPMorgan Chase Bank NA, contained 99 percent of the New York-based firm's $79 trillion of notional derivatives, according to the OCC.

'Not FDIC Insured'

Andrew Gray, a spokesman for the FDIC and Barbara Hagenbaugh of the Federal Reserve declined to comment on Bank of America's filing.

Congressional Democrats including North Carolina Representative Brad Miller and Ohio Senator Sherrod Brown asked regulators last month whether they explored potential risks from the derivative moves. Eighteen lawmakers signed onto letters seeking information.

"These derivative trades are not FDIC insured," said Jerry Dubrowski, a Bank of America spokesman. "Other financial institutions hold higher derivative balances in their banking entities."

Bank of America Chief Financial Officer Bruce R. Thompson discussed the transfers on a conference call with analysts last month after Bloomberg News reported that federal regulators were at odds over the movements.

"We had worked very hard over the course of the last nine months to be prepared to the extent that we did receive a downgrade, and feel very good about the way that we've minimized the potential impact," he said on the Oct. 18 call. The moves are part of "the normal course of dealings that we've had with counterparties since Merrill Lynch and BofA came together."

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net Dan Kraut at dkraut2@bloomberg.net .

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(BN) Stocks in U.S. Gain on Consumer Confidence, Italy Debt-Reduction Measures

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U.S. Stocks Gain on Consumer Confidence, Italy; Euro, Oil Climb

Nov. 11 (Bloomberg) -- Stocks rallied, preventing a second straight weekly decline for the Standard & Poor's 500 Index, and commodities climbed as U.S. consumer confidence improved and Europe took steps to address its debt crisis. Italy's bonds gained and oil reached a three-month high.

The S&P 500 jumped 1.9 percent to close at 1,263.85 at 4 p.m. in New York, pushing it up 0.8 percent for the week and 0.5 percent in 2011. The MSCI All-Country World Index added 2.2 percent after falling 3.1 percent in the previous two days. The euro appreciated 1.1 percent to $1.3752, while the dollar slid versus 16 major peers. Italian 10-year bond yields declined 44 basis points to 6.45 percent. Oil rose to almost $99 a barrel, capping the longest streak of weekly gains since 2009.

U.S. equities extended an early rally after a gauge of consumer sentiment topped estimates in November, reaching the highest level since June and bolstering optimism before the holiday shopping season. Italy's Senate approved debt-reduction measures, paving the way for a new government led by former European Union Competition Commissioner Mario Monti, while Greece swore in Lucas Papademos to head a unity government.

"It's like investors hit the keystroke to risk on," Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion, said in a telephone interview. "The European situation is seemingly coming to some closure and a decent consumer confidence report brought investors to risk assets."

The S&P 500 rose for a second day, adding to yesterday's 0.9 percent advance that was triggered by a drop in jobless claims and a retreat in Italian bond yields from records. The S&P 500 has rebounded about 15 percent from a 13-month low on Oct. 3 as the Citigroup Economic Surprise Index for the U.S., which gauges whether data is beating or trailing estimates, climbed to a seven-month high.

Disney Surges

Walt Disney Co. rose 6 percent to lead the Dow Jones Industrial Average higher after fourth-quarter earnings exceeded estimates on growth in cable TV and U.S. resorts. Bank of America Corp. and Alcoa Inc. also rose at least 3.4 percent, helping lead the Dow up 259.89 points, or 2.2 percent, to 12,153.68.

About 6 billion shares changed hands on all U.S. exchanges, the slowest trading session since July 25. Treasury trading was closed for the Veterans Day holiday.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment climbed to 64.2 this month, the highest since June, from 60.9 in October. The median estimate of economists surveyed by Bloomberg News called for a reading of 61.5.

The Stoxx Europe 600 Index climbed 2.4 percent as all 19 industries advanced. A gauge of European banks rebounded 3.6 percent following two days of losses as BNP Paribas SA of France and the Royal Bank of Scotland Group Plc jumped more than 5 percent. Telecom Italia SpA gained 5.3 percent after third- quarter profit beat analysts' estimates.

Yield Spreads

The extra yield investors demand to hold Italy's 10-year debt instead of German bunds, Europe's benchmark government securities, dropped 55 basis points to 456 after climbing to a euro-era record 575 basis points two days ago. The French-German spread narrowed 19 basis points to 150 after S&P corrected an erroneous message to subscribers yesterday that suggested the nation's AAA credit rating had been lowered.

The Greek two-year yield rose to a record of 111 percent. The cost of insuring European sovereign debt fell, with the Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments dropping 12 basis points to 333.

The euro strengthened against 12 of its 16 major counterparts. The U.S. currency fell against all 16, with the Dollar Index dropping 1 percent.

Crude oil rose 1.2 percent to $98.99, the highest since July, and capped a sixth straight weekly advance. Copper climbed 2.7 percent, the most in two weeks, to $3.4635 a pound. China, the biggest buyer of industrial metals, will focus on domestic growth to boost the world economy, Vice Finance Minister Wang Jun said in Honolulu.

The MSCI Emerging Markets Index rallied 1.8 percent, with Brazil's Bovespa surging 2.1 percent. The Hang Seng China Enterprises Index in Hong Kong advanced 1.3 percent, Hungary's BUX jumped 4.4 percent and Brazil's Bovespa gained 2.1 percent. The Kospi Index rose 2.8 percent after South Korea left interest rates unchanged, while India's Sensitive Index lost 1 percent as the nation's factory output slowed. Funds investing in developing-nation stocks took in $2.1 billion in the week ended Nov. 9, Citigroup Inc. said, citing data compiled by EPFR Global.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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(BN) Asia Ascending Drives Obama Message as America’s First Pacific President

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Asia Rise Drives Obama Message as U.S.'s First Pacific President

Nov. 11 (Bloomberg) -- President Barack Obama, who calls himself "America's first Pacific president," is pressing Americans to think more about Asia -- and, in some ways, to think more like Asians do.

He's highlighting his administration's turn toward the Pacific by hosting the Asia-Pacific Economic Cooperation Summit in Hawaii on Nov. 12-13 and visiting Indonesia on Nov. 17-19 as the first U.S. president to participate in the East Asia Summit. In between the two meetings, he'll visit Australia to discuss expanded military ties.

In speeches in the U.S., China, Japan, South Korea, India, Singapore and Indonesia, Obama has said his Asia focus is driven by today's economic and demographic trends, while his instincts about the continent are influenced by his birth in Hawaii and four boyhood years in Indonesia.

"The Pacific Rim has helped shape my view of the world," he said in Tokyo on Nov. 14, 2009. During his lifetime, he said, "The fortunes of America and the Asia-Pacific have become more closely linked than ever."

His attention to Asia also has a domestic political dimension. Since introducing his $447 billion jobs plan on Sept. 8, Obama has emphasized spending by China, South Korea and other nations on airports, infrastructure and teachers in an effort to build support for his own provisions, which face opposition from congressional Republicans.

Competition is 'Real'

He has pointed to China and India to stress another priority of his: Promoting science and technology education, to urge American parents, students, schools and companies to train more engineers.

In his Jan. 25 State of the Union address, Obama said the two nations have been "educating their children earlier and longer" with more math and science. China, he said, houses the world's fastest computer and largest private solar research facility.

"The competition for jobs is real," he said. "But this shouldn't discourage us. It should challenge us."

Since his first year in office, Obama has asked Americans to look beyond concerns about Chinese dominance or U.S. job losses and see a diverse region that can be a growing market for U.S. goods and services, yield stronger foreign policy alliances and help respond to global challenges such as climate change.

"I would never say that he's saying America should emulate Asia," said Satu Limaye, director of the Washington office of the East-West Center, a Honolulu policy center that studies U.S. relations with Asia-Pacific nations. "What he's saying is, 'We should take note of what is happening in other places,' and this is a call for us to become more competitive."

Export Boom

American companies are already sold on the region's importance: The U.S. exported $326.4 billion in 2010 to the Pacific Rim in goods and services, according to U.S. Census Bureau data, up from $254.6 billion in 2009. That exceeded American exports to the European Union or to Canada. From 2000 to 2010, exports to the Pacific Rim rose 71.5 percent.

Those include exports to Australia, Brunei, China, Hong Kong, Indonesia, Japan, South Korea, Macao, Malaysia, New Zealand, Papua New Guinea, the Philippines, Singapore and Taiwan.

Looking at a broader swath of Asia, the U.S. in 2009 exported $414 billion in goods and services to Asian countries, a 56 percent increase since 2001, according to the Asia 40 index of countries developed by the East-West Center's Asia Matters for America initiative. That index compiles data from the census, U.S. Department of Commerce and Institute of International Education.

Supporting U.S. Jobs

That 40-country region also accounted for 30 percent of total U.S. jobs supported by exports, or almost 850,000, in 2009. Students from the Asia-Pacific contributed $9 billion a year to the U.S. economy, and there were 350,000 Asian students studying in the U.S. in the 2008-09 academic year, according to the index, which includes countries in Northeast Asia, Southeast Asia and South Asia, as well as Australia and New Zealand. And 26 percent of the U.S.'s foreign-born population came from Asia.

Free-trade agreements among Asian nations are expanding, meanwhile, from six deals in 1995 to 70 now in force and 70 more under negotiation, according to the U.S. Chamber of Commerce. The U.S. has trade accords with Australia, Singapore and South Korea. The U.S.-Korea Free Trade Agreement, which Obama signed on Oct. 21, will boost American exports by as much as $10.9 billion in its first year in full effect, the U.S. International Trade Commission says.

Obama underlined his emphasis on Asia in 2009 by advocating replacing the Group of Eight economic forum, whose only Asian member is Japan, with the G-20, which also includes China, South Korea, India and Indonesia, as the world's key economic body.

State Dinners

Since then, three of Obama's five White House state dinners have honored Asian leaders -- Chinese President Hu Jintao, Indian Prime Minister Manmohan Singh and South Korean President Lee Myung-bak. He's made a major Asia trip each year.

"For a very long time, Asia was a region that Americans associated with outsourcing and with cheap labor and cheaper products here at home," White House deputy national security adviser Ben Rhodes said.

With the growth of middle classes beyond Japan and China, in South Korea, Thailand, Malaysia and Indonesia, "You're going to increasingly see U.S. job growth supported by exports to these countries," Rhodes said.

Obama thinks the U.S. has "an enormous stake" in the region's future and wants to convey that "our economic growth at home is going to be tied directly to our ability to be competitive in these markets."

Cooperate, Don't 'Collide'

"More is to be gained when great powers cooperate than when they collide," Obama told students in Shanghai on Nov. 16, 2009. It was on that Asia trip, during the stop in Tokyo, that he declared himself ���America's first Pacific president."

Speaking in the native tongue to a Jakarta crowd on Nov. 10, 2010, Obama said, "Indonesia is a part of me" and recalled running through fields with water buffalo and goats.

"A rising middle class here in Indonesia means new markets for our goods," he said. "Emerging economies like Indonesia have a greater voice and also bear a greater responsibility for guiding the global economy."

At a town hall event in Mumbai on Nov. 7, 2010, he described "a tug of war within the United States" between those threatened by globalization and those who accept a new global reality. For most of his life, he said, the U.S. was dominant enough to meet other countries "on our terms," and now "we've got to negotiate this changing relationship."

Saving Jobs

Obama brought South Korean President Lee to Detroit on Oct. 14 to a General Motors Co. plant to promote the trade agreement between the U.S. and South Korea. Lee told the workers the trade deal "is going to protect your jobs."

In an Oct. 11 speech, Obama said the sort of global envy once directed at the U.S. for the Hoover Dam is now being directed at the Chinese for the airport in Beijing.

"We can't compete that way, playing for second or third or fourth or eighth or 15th place," he said.

Obama's Asia focus meshes with the U.S. Chamber of Commerce, even as his domestic policies on taxes and spending often clash with the business community.

"Asia is the fastest-growing market in the world," said chamber spokesman J.P. Fielder.

Secretary of State Hillary Clinton said the U.S. should turn more resources to the region. In a piece on "America's Pacific Century" for this month's Foreign Policy magazine, Clinton wrote that a U.S. economic recovery "will depend on exports and the ability of American firms to tap into the vast and growing consumer base of Asia." The U.S. also must be engaged in military and other issues important to the region, she said.

"In Asia, they ask whether we are really there to stay, whether we are likely to be distracted again by events elsewhere, whether we can make -- and keep -- credible economic and strategic commitments, and whether we can back those commitments with action," Clinton wrote. "The answer is: We can, and we will."

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(BN) Gold Traders Most Bullish Since 2004 on Deepening Debt Crisis: Commodities

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Gold Traders Most Bullish Since '04 on Debt Crisis: Commodities

Nov. 11 (Bloomberg) -- Gold traders and analysts are the most bullish in at least seven years as investors accumulate metal at the fastest pace since August to protect their wealth from a widening European debt crisis.

Twenty-one of 22 surveyed by Bloomberg expect bullion to rise on the Comex in New York next week, the third consecutive increase and the highest proportion in data going back to April 2004. Holdings in exchange-traded products backed by gold rose 27.5 metric tons this week, within 1 percent of the record set almost three months ago, data compiled by Bloomberg show.

Gold exceeded $1,800 an ounce for the first time in seven weeks on Nov. 8 and hedge funds are holding their biggest bet on higher prices since mid-September, Commodity Futures Trading Commission data show. The metal is rebounding after tumbling as much as 20 percent in three weeks in September on demand for what are perceived as the safest assets. Almost $9 trillion was wiped off the value of global equities since May and yields on Italian and Greek bonds rose to euro-era records this week.

"Throughout history gold has protected people from the sort of turmoil that we're seeing," said Mark O'Byrne, the Dublin-based executive director of GoldCore Ltd., a brokerage that sells everything from quarter-ounce British Sovereigns to 400-ounce bars. It's "an important thing to own when there is this sort of volatility in stock markets and concern about currency devaluations."

Gold climbed 24 percent to $1,764.50 this year, heading for an 11th consecutive annual advance. It's the third-best performer behind gas oil and heating oil in the Standard & Poor's GSCI Index of 24 commodities, which rose 5 percent. The MSCI All-Country World Index of equities retreated 8.9 percent and Treasuries returned 8.6 percent, according to a Bank of America Corp. index.

Investor Concern

The gold survey has forecast prices accurately in 223 of 387 weeks, or 58 percent of the time.

While gold is benefiting from mounting investor concern that European nations will default on their debt, other commodities may drop because slower growth will curb demand for raw materials. Traders expect copper, raw sugar and soybeans to decline next week and are equally divided on corn, separate Bloomberg surveys showed.

The 27.5 tons of gold added to ETPs this week is the most since Aug. 19 and investors bought 40.9 tons this month, the most since July. Combined holdings of 2,312.1 tons are now valued at $131.2 billion and exceed the reserves of all but four central banks, data compiled by Bloomberg show. The record of 2,330 tons was set Aug. 18.

All-Time High

Money managers raised their combined net-long position in U.S. futures and options by 6.8 percent to 148,279 contracts in the week ended Nov. 1, CFTC data show. Wagers were a record 253,653 contracts in August, a month before prices climbed to an all-time high of $1,923.70.

Prices slumped in September as the decline in equity markets obliged some investors to sell their bullion to cover those losses. Global stocks slipped to the lowest level in almost three weeks yesterday.

"The major risk is that a sharp decline in global stock markets will lead to renewed margin calls and fund liquidations," said Adrian Day, president of Adrian Day Asset Management in Annapolis, Maryland. That may prompt "many managers to sell gold, a highly liquid asset."

Gold may reach $1,950 by the end of the first quarter, according to the median estimate of eight of the 10 most- accurate forecasters tracked by Bloomberg over the past two years. The survey was carried out at the end of October.

Technical Charts

Technical indicators suggest the rally that began in September has further to go. While gold jumped 15 percent since reaching an 11-week low Sept. 26, its 14-day relative-strength index is at 57, below the level of 70 that indicates to some who study technical charts that the metal is poised to drop.

Gold priced in euros is doing even better, rising 4.6 percent this month compared with a 2.3 percent gain for dollar- denominated bullion. Dennis Gartman, the Suffolk, Virginia-based economist and editor of the Gartman Letter, owns gold priced in euros and wrote yesterday that it reduces volatility.

Commodities as measured by the S&P GSCI gauge are heading for their weakest performance since 2008. Demand for everything from crude oil to aluminum to wheat contracted that year as nations contended with the worst global recession since World War II. The International Monetary Fund is anticipating no return to that slump, forecasting economic growth of 4 percent in 2012, unchanged from this year.

Eleven of 21 traders and analysts surveyed by Bloomberg expect copper to fall next week. The metal for delivery in three months, the London Metal Exchange's benchmark contract, declined 22 percent to $7,523.75 a ton this year.

Nine Surveyed

Raw-sugar futures dropped 11 percent since reaching a one- month high on Oct. 17 to 25.37 cents a pound on ICE Futures U.S. in New York. Prices declined 21 percent this year. Six of nine people surveyed expect prices to drop next week.

Eighteen of 30 surveyed anticipate declines in soybeans. Out of 29 corn traders and analysts, 11 said prices will rise and the same amount predicted a retreat. Corn increased 3.3 percent to $6.4975 a bushel in Chicago this year, while soybeans fell 16 percent to $11.7725 a bushel.

"At the moment, it seems that everything is dependent on the sovereign debt crisis in the euro zone," said Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt. "If it's escalating we will probably see much lower commodity prices in general. Gold should still be well supported."

 Gold survey results: Bullish: 21 Bearish: 1 Hold: 0 Copper survey results:  Bullish: 9 Bearish: 11 Hold: 1 Corn survey results: Bullish: 11 Bearish: 11 Hold: 7 Soybean survey results: Bullish: 8 Bearish: 18 Hold: 4 Raw sugar survey results: Bullish: 2 Bearish: 6 Hold: 1 White sugar survey results: Bullish: 3 Bearish: 5 Hold: 1 White sugar premium results: Widen: 2 Narrow: 4 Neutral: 3 

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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