Gold Bores Investors as Volatility Drops to 14-Month Low

Photographer: Brent Lewin/Bloomberg

Argor Heraeus SA-branded one kilogram gold bars are arranged for a photograph at the Chinese Gold and Silver Exchange Society in Hong Kong. Bullion, which slid last year by the most since 1981 as some investors lost faith in the metal as a store of value, rebounded 11 percent in 2014 as the global expansion faltered and tensions escalated in Ukraine. Close

Argor Heraeus SA-branded one kilogram gold bars are arranged for a photograph at the... Read More

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Photographer: Brent Lewin/Bloomberg

Argor Heraeus SA-branded one kilogram gold bars are arranged for a photograph at the Chinese Gold and Silver Exchange Society in Hong Kong. Bullion, which slid last year by the most since 1981 as some investors lost faith in the metal as a store of value, rebounded 11 percent in 2014 as the global expansion faltered and tensions escalated in Ukraine.

Investors are too busy pushing stock prices to all-time highs to bother with gold, sending bullion’s price fluctuations to the lowest in almost 14 months.

The metal’s 60-day historical volatility dropped to 12.33 today, the lowest since April 2013, according to data compiled by Bloomberg. Bullion futures traded in a range of about $18 this week, compared with about $51 last week.

Gold’s open interest fell to a five-year low in April and the value of exchange-traded funds backed by bullion contracted by $2.6 billion in May, the largest drop this year. The metal’s appeal as a haven diminished as U.S. equities surged and tension between Ukraine and Russia eased. More than $1.1 trillion was added to the value of global stock markets last month.

“It’s apparent that some people are fleeing the gold market and find it boring,” Lance Roberts, who helps oversees $600 million as chief strategist for STA Wealth in Houston, said yesterday. “People are more upbeat about the economy and stories about political turmoil are not hogging the headlines, so there is little demand for the safe-haven gold.”

Gold futures for August delivery rose 0.7 percent to $1,253.30 an ounce on the Comex at 11:39 a.m. in New York. The metal touched $1,240.20 on June 3, the lowest since January. Last year, prices plunged 28 percent amid concern that the Federal Reserve would slow the pace of monetary stimulus.

Narrow Spread

Prices could fall to $1,150 by the end of the year, according to James Cordier, the founder of Optionsellers.com in Tampa, Florida. The recent narrow trading spread, coupled with declines in price swings, signal that gold is poised to break out of its range, he said.

The 60-day volatility measure is at the lowest since April 11, 2013. In the next two sessions, prices tumbled 13 percent, entering a bear market and capping the biggest slump since 1980. The annual decline in 2013 snapped 12 straight years of gains.

Holdings in global ETPs backed by the metal are near the lowest since 2009. More than $73 billion was erased from the value of the funds in 2013.

“There is not much interest in gold at the moment, and things are calmer in Ukraine,” Tommy Capalbo, a broker at Newedge Group in New York, said yesterday. “Money is flowing into equities as people are more cautiously optimistic about the economy.”

Fed Tapering

The Standard & Poor’s 500 Index of shares gained 0.4 percent to 1,934.80 in New York, after reaching an all-time high of 1,934.94 today.

Bullion climbed 70 percent from December 2008 to June 2011 as the Fed bought debt and held borrowing costs near zero percent. The central bank reduced its monthly asset buying to $45 billion in April after the fourth straight $10 billion cut.

Gold’s open interest, the aggregate number of futures contracts yet to be closed, liquidated or delivered, dropped to 362,838 on April 4, the lowest since May 2009. Open interest was at 382,141 as of June 3.

Silver futures for July delivery rose 1.4 percent to $19.05 an ounce in New York. The metal’s 60-day volatility this week fell to the lowest since 2005. Prices touched $18.615 on May 30, the lowest since June 28, 2013.

To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editors responsible for this story: Millie Munshi at mmunshi@bloomberg.net Joe Richter

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