Gold Heads for Bear Market as Investors Weigh Holdings, Recovery

Gold fell for a fourth day, nearing its first bear market since 2008, as investors reduced asset holdings amid optimism a global economic recovery will curb demand. 

Gold for immediate delivery declined as much as 0.2 percent to $1,551.05 an ounce and was at $1,553.80 at 8:11 a.m. in Singapore. Prices touched $1,540.29 yesterday, the lowest since May 30, and are set for a second weekly drop. Bullion tumbled 18.2 percent from a record close of $1,900.23 in September 2011, nearing the 20 percent that typically defines a bear market.

Holdings of gold-backed exchange-traded products are down 7.5 percent this year to the lowest since August, data compiled by Bloomberg show. If ETPs outflows gain momentum, prices are likely to struggle in the coming sessions until a new catalyst emerges, Barclays Plc said yesterday. The bull market in equities entered its fifth year last month, with the S&P 500 more than doubling from its bottom in 2009.

“There seems to be an overarching sense of complacency about the world economic picture at the moment,” said Gavin Wendt, a director at Mine Life Pty. in Sydney. “There’s a pervading view that gold’s run is over, get out of gold and start putting your money into the share market.”

Gold ETPs stood at 2,435.35 metric tons yesterday, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index (SPX) rose to a record on April 2, after rallying 10 percent in the first quarter as gold dropped 4.6 percent.

Gold for June delivery was little changed at $1,552 an ounce on the Comex in New York. Prices dropped to $1,539.40 yesterday, the lowest for a most-active contract since May 30.

(Source: Bloomberg)