London - Gold fell to the lowest since May, nearing a bear market, on signs that investors are seeking higher returns in equities as the global economic recovery cuts demand for haven assets.
Global holdings of exchange-traded products backed by gold are down 7.4 percent this year, data compiled by Bloomberg show.
Prices fell 7.3 percent this year through yesterday, while the MSCI All-Country World Index of equities advanced 5.3 percent.
The metal may continue to decline as the resilience of the financial system to recent developments in Italy and Cyprus suggests reduced risk of a so-called major meltdown, Credit Suisse Group AG said yesterday.
“Equities continue to attract more capital,” David Lee, a vice president at Heraeus Precious Metals Management in New York, said in a telephone interview.
“The safe-haven premium for gold also seems to have disappeared with the world not falling apart.”
Gold futures for June delivery fell 0.4 percent to $1,547.80 an ounce at 10:33 a.m. on the Comex in New York, after dropping to $1,539.40, the lowest for a most-active contract since May 30.
Trading volume was 28 percent higher than the average for the past 100 days for the time of day, according to data compiled by Bloomberg.
Prices have tumbled 18.2 percent from a record close of $1,891.90 in August 2011, nearing the 20 percent that typically defines a bear market.
Metal for immediate delivery has slumped 18.5 percent from its all-time high settlement of $1,900.23 in September that year.
Bullion rallied every year from 2001 through 2012 as investors sought protection from currency debasement and potential inflation.
Gold assets in ETPs tumbled 6.9 percent last quarter, the most since at least 2004. Holdings in the SPDR Gold Trust, the biggest bullion-backed ETP, are at the lowest since July 2011.
“Investors choose to stay away or book profits after record first-quarter ETF outflows,” Andrey Kryuchenkov, a London-based analyst at VTB Capital, wrote in a report today.
“Investor sentiment is likely to remain positive on equities versus downbeat gold going forward.”.
Silver futures for May delivery slid 0.1 percent to $26.765 an ounce.
Earlier, prices slumped as much as 0.8 percent to $26.575, the lowest since July 24. - Bloomberg News