Gold Futures Post Longest Slump Since December 2011

Gold futures fell, capping the longest slump in 16 months, as U.S. filings showed that George Soros and BlackRock Inc. cut stakes in exchange-traded products backed by the metal, signaling waning investment demand.

Soros Fund Management LLC lowered its holding in the SPDR Gold Trust, the biggest such fund, by 12 percent as of March 31 from the previous quarter, data showed yesterday. The World Gold Council said today that demand dropped 13 percent in the first quarter from a year earlier as ETP sales outweighed a surge in purchases of coins, bars and jewelry in China and India.

“There has been heavy fund selling in the past few days, and we continue to see this rotation out of precious metals,” Frank McGhee, the head dealer at Integrated Brokerage Services LLC in Chicago, said in a telephone interview. “We’re not seeing a runaway recovery, but we’re getting growth and little inflation, so the reasons for the original run-up in gold are fading away.”

Gold futures for June delivery dropped 0.7 percent to close at $1,386.90 an ounce at 1:38 p.m. on the Comex in New York. The price fell for the sixth straight session, the longest slump since December 2011. Earlier, the metal touched $1,368, the lowest for a most-active contract since April 18.

Dollar, Equities

Gold has dropped 17 percent this year, tumbling into a bear market last month, as some investors lost faith in the metal as a store of value, while the dollar rose 5 percent against a six-currency basket. The Standard & Poor’s 500 Index of equities climbed to a record yesterday.

Holdings in the SPDR fund yesterday fell 0.4 percent to 1,047.13 metric tons, the lowest since March 2009. They have declined 303.7 tons this year. Soros Fund Management cut its stake in the fund by 55 percent in the fourth quarter.

In the first quarter, Paulson & Co., the largest investor in SPDR, maintained its stake of 21.8 million shares, while funds run by Northern Trust and BlackRock had reductions of more than half. Schroder Investment Management Group bought shares.

Holdings in global gold ETPs have dropped 16 percent this year, according to Bloomberg data.

Silver futures for July delivery rose less than 0.1 percent to $22.659 an ounce. Earlier, the metal touched $22.06, the lowest since April 16. The price has slumped 25 percent this year.

On the New York Mercantile Exchange, platinum futures for July delivery dropped 0.3 percent to $1,485.60 an ounce.

Palladium futures for June delivery rose 1.6 percent to $740.75 an ounce. The price gained for the fourth straight session, the longest rally since March 8.

(Corrects to remove reference to Farallon in seventh paragraph. For more on the gold bear market, see EXT5.)
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