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Commodity Investors Withdrew a Record $9.3 Billion in April

May 9 (Bloomberg) -- Investors withdrew a record $9.3 billion from commodity exchange-traded products last month as gold sales pushed the metal into a bear market, BlackRock Inc. said.

The outflow for commodities in April pushed the total for the first four months this year to $17.8 billion, compared with inflows of $6 billion for the same period in 2012, BlackRock said in a report dated April 30. The previous record for commodity sales was $5.2 billion in February. Gold outflows were an all-time high of $8.7 billion last month as the metal slid to a two-year low in London on April 16, two sessions after falling into a bear market.

The Standard & Poor’s GSCI gauge of 24 raw materials fell 4.7 percent last month, the most since May. Investors cut gold-backed ETP assets that reached a record in December as faith in the metal as a store of value waned after inflation failed to accelerate and confidence mounted that the U.S. economy is improving. Gold prices that rallied for 12 years in the best run in at least nine decades are down 24 percent from the September 2011 peak as U.S. equities climbed to a record.

“The rationale for buying commodities kind of disappeared,” Donald Selkin, who helps manage about $3 billion of assets as the chief market strategist at National Securities Corp. in New York, said in a telephone interview. “People said, ‘There’s no inflation, and the economy’s slowing, so what do I need commodities for?’ Plus the stock market is going up, so people like to ride the winning horse.”

The S&P GSCI gauge of 24 commodities dropped 2.1 percent this year, including a 13 percent decline for gold. The MSCI All-Country World Index of equities has rallied 10 percent, while a Bank of America Corp. index shows Treasuries returned 0.4 percent.

Gold ETPs

Gold investments through ETPs dropped $17.9 billion so far this year through April, BlackRock said. Investors now own about 2,239.2 metric tons of billion through the products that first listed in 2003, compared with a record 2,632.5 tons in December, data compiled by Bloomberg show. Hedge funds and other speculators have cut bets on rising prices by 72 percent since October, U.S. Commodity Futures Trading data show.

“The challenges facing the category have intensified as moderating inflation expectations and other factors led to a recent record plunge in the spot price for gold,” BlackRock said in the report.

Prices reached $1,321.95 an ounce on April 16 and traded at $1,463.03 at 2:31 p.m in New York. Analysts at banks including Goldman Sachs Group Inc., Barclays Plc and Credit Suisse Group AG are among those forecasting further declines.

To contact the reporters on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net

To contact the editors responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net; Steve Stroth at sstroth@bloomberg.net

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