Gold ETP Holdings Cap Record Drop as $17.9 Billion Wiped Out

Gold holdings in exchange-traded products plunged 174 metric tons last month, the biggest drop ever, as prices entered a bear market and wiped $17.9 billion from the value of the funds.

Holdings in the ETPs slumped 7.1 percent in April to 2,275.84 tons, the lowest since October 2011, data compiled by Bloomberg show. The value of the assets dropped to $108.1 billion. Investors pulled $10.23 billion from gold funds in the first quarter, the most since at least 2000, when the data begins according to Cambridge, Massachusetts-based EPFR Global.

The drop in ETP holdings underscores how some investors have lost faith in gold as the traditional store of value, even as central banks print money on an unprecedented scale to boost growth. While prices have rebounded since touching a two-year low on April 16, they fell 7.7 percent last month, the biggest loss since December 2011, as the stock market rallied and consumer costs remained stable.

“This is a capitulation by gold investors as equities were winning and there were no signs of inflation,” Tom Winmill, who helps manage $200 million of assets in Walpole, New Hampshire, for Midas Funds, said in a telephone interview. “Many have seen the reasons for holding gold fade.”

Gold futures for June delivery fell 0.5 percent to $1,465.40 an ounce today on the Comex in New York. Prices are down 13 percent this year, heading for the first decline after 12 straight years of gains. The MSCI All-Country World Index of equities is up 8.8 percent in 2013, while the dollar climbed 2.1 percent against a basket of six major trading partners.

(Source: Bloomberg)