BLBG:Gold Slumps Toward Bear Market as Investors Cut Holdings
Gold extended losses for a third day, nearing a bear market after 12 years of gains, on concern that investors are seeking higher returns in other assets as the global economy recovers. Silver, platinum and palladium dropped.
Holdings in exchange-traded products backed by bullion contracted to the lowest since August yesterday, according to data compiled by Bloomberg. Credit Suisse Group AG said yesterday that gold may continue to decline, with the resilience of the financial system to recent developments in Italy and Cyprus suggesting reduced risk of a so-called major meltdown.
“Investor sentiment is likely to remain positive on equities versus downbeat gold going forward,” Andrey Kryuchenkov, a London-based analyst at VTB Capital, wrote in a report today. “The dollar also remains relatively strong, which deters gold buyers, while investors choose to stay away or book profits after record first-quarter ETF outflows.”
Gold for immediate delivery lost 0.8 percent to $1,545.03 an ounce by 9:36 a.m. in London. It slid as much as 1.1 percent to $1,540.29, the lowest level since May 30. Bullion for June delivery fell 0.6 percent to $1,544.40 an ounce on the Comex in New York. Futures trading volume was double the average for the past 100 days for the time of day, according to data compiled by Bloomberg.
The metal has slumped 18.7 percent from its record close of $1,900.23 in September 2011, nearing the 20 percent that typically defines a bear market. Holdings in ETPs are down 7.4 percent from a record reached Dec. 20 to 2,437.4 metric tons, data compiled by Bloomberg show. Holdings in the SPDR Gold Trust, the biggest bullion-backed ETP, fell to the lowest since July 2011.
Higher Returns
“The move reflects the attitude toward the precious metal at present and its dwindling perception as a safe haven and also reflects investor appetite for higher returns,” Cailey Barker, an analyst at Numis Securities Ltd. in London, said today in a report.
The Standard & Poor’s 500 Index rose to a record on April 2, after rallying 10 percent in the first quarter, as gold dropped 4.6 percent. Gold rallied every year from 2001 through 2012 as investors sought protection from currency debasement and potential inflation.
In Europe, 54 out of 56 economists in a Bloomberg News survey expected European Central Bank President Mario Draghi and his board to keep euro-area borrowing costs today at a record low of 0.75 percent. Two predicted a drop to 0.5 percent. The euro slipped 0.2 percent to $1.2827.
Silver for immediate delivery fell 1.1 percent to $26.72 an ounce, after slumping to $26.6912 earlier today, the lowest level since July 24.
Spot platinum dropped as much as 1.5 percent to $1,509.60 an ounce, the lowest since Aug. 31, and traded recently at $1,519.40. Palladium lost as much as 1.4 percent to $741.05 an ounce, the cheapest since March 20.
To contact the reporters on this story: Maria Kolesnikova in London at mkolesnikova@bloomberg.net; Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net
To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net
