Biggest Gold ETP Holdings Fall in Longest Decline on Record

Assets in the SPDR Gold Trust, the biggest exchange-traded fund backed by the precious metal, dropped in the longest slump on record as the U.S. economy improves and prices fell.

Holdings declined 12 metric tons to 1,258.40 tons, the lowest since August, according to data on the fund’s website yesterday. The assets have fallen for seven sessions, the longest stretch since the fund was introduced in 2004.

Global investments in all gold-backed exchange-traded products tracked by Bloomberg have tumbled 4.7 percent this year as improving economies cut demand for the precious metal as a haven asset. The cycle for gold prices, which climbed for 12 straight years, has probably turned as demand collapses, Goldman Sachs Group Inc. said in a report this week. Billionaire investors George Soros and Louis Moore Bacon cut their stakes in bullion ETPs last quarter, according to government filings.

“We’ve had pretty decent economic data, which is very negative for gold,” Dave Lutz, head of exchange-traded fund trading and strategy at Stifel Nicolaus & Co. in Baltimore, said in a telephone interview. “It’s a big reason why we’ve seen the weakness in the gold price and why we’re seeing a lot of the liquidation out of the ETF.”

Gold for immediate delivery has slumped 4.6 percent this year, and traded at $1,598.33 an ounce at 8:28 a.m. in London. The price touched $1,555.55 on Feb. 21, the lowest level since July. The MSCI All-Country World Index of equities has advanced 4.4 percent in 2013.

‘Risk Assets’

“The rush into risk assets in recent weeks appears to have been fueled by the expectation that China and Europe have bottomed and that the U.S. has avoided recession and will re- accelerate,” said James Dailey, who manages $215 million at TEAM Financial Asset Management LLC in Harrisburg, Pennsylvania.

Economic growth in China, the second-largest economy, will rebound to 8.1 percent this year from 7.8 percent, according to the median of estimates tracked by Bloomberg. U.S. durable-goods orders excluding transportation equipment climbed 1.9 percent in January, the most in a year, according to data from the Commerce Department yesterday.

Hedge funds and other money managers cut their bets on a gold rally by 40 percent in the week to Feb. 19 to 42,318 futures and options contracts, the biggest drop since July 2007, government data show. Prices are still up about 80 percent since the end of 2008 as the U.S. Federal Reserve expanded its balance sheet to more than $3 trillion, joining central banks from Europe to Asia in stimulus actions.

“The foot’s still on the pedal for central-bank easing, so this drop in gold could be short-lived,” said Lutz at Stifel Nicolaus.

To contact the reporters on this story: Millie Munshi in New York at mmunshi@bloomberg.net; Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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