Gold Holdings Set for Biggest Monthly Drop in Almost Five Years

Gold assets in exchange-traded products are poised for the largest monthly drop since April 2008 as an improving U.S. economy hurts haven demand and stokes concern that the metal’s 12-year bull run is ending.

Holdings contracted 3.15 percent in February, slumping to a five-month low of 2,529.994 metric tons yesterday, according to data compiled by Bloomberg. The assets have shrunk 3.9 percent from a record in December.

The cycle for prices has likely turned as the U.S. recovery gathers speed, Goldman Sachs Group Inc. said on Feb. 25, citing a collapse in investor holdings. Billionaire investors George Soros and Louis Moore Bacon cut their stakes in ETPs in the final quarter of 2012 as John Paulson maintained his share, filings showed. While futures have lost 3.1 percent in February and are poised for the worst run since 1997, they’ve rebounded 2.4 percent this week after U.S. Federal Reserve Chairman Ben S. Bernanke yesterday defended the central bank’s stimulus program.

“While we think it’s too soon to call for the death of gold as economic data remains uneven, more people are optimistic about the outlook and want to move money into riskier assets,” Feng Liang, an analyst at GF Futures Co., a unit of China’s third-biggest listed brokerage, said from Guangzhou, China.

Gold for April delivery traded at $1,611.10 an ounce on the Comex at 11:38 a.m. in Singapore, poised for the fifth monthly loss. Futures reached a record $1,923.70 in September 2011.

ETPs trade like shares and enable investors to hold commodities without taking physical delivery. Assets in gold-backed products have risen every year since 2004, expanding 12 percent in 2012 as futures rose 7 percent.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE