Investors increasingly are lured by rising stocks and other assets that usually get a lift from growth. Bulls who swore by the metal amid the turmoil of the 2008 global financial crisis (GFC) and the subsequent euro-zone debt crisis are now beating a retreat.
“As equities continue to rally and inflation data fails to show inflation, I don’t see any reason to own gold, unless you like how it looks on the shelf,” said Adam Klopfenstein, senior market strategist in Chicago with Archer Financial Services, a brokerage.
“You have the general recognition that the US is likely to come out of the doldrums and resume sustainable growth earlier than anywhere else,” said Frances Hudson, Global Thematic Strategist for Standard Life Investments, an international asset manager with over $US270 billion ($A276.29 billion) under management.
On Friday, the Thomson Reuters/University of Michigan early May consumer sentiment index jumped to 83.7 in May from 76.4 at the end of April. The consumer confidence reading was at its highest since 2007. Separately, the Conference Board’s index of leading economic indicators rose 0.6 per cent in April, more than economists had expected.
The ICE Dollar Index has rallied more than three per cent so far this month in a sign that many investors have abandoned inflation concerns, especially as some Fed officials have become more vocal about scaling back stimulus measures.
In the past, physical buyers of gold bullion and jewellery have acted as a support to prices, but this time around, selling by mainstream investors who had exposure to gold through exchange-traded funds is overwhelming that demand.
“What we see is a battle between institutional investors liquidating and retail investors bottom-fishing, and it comes as no surprise that the institutions are winning out because they have a lot more firepower,” said Michael Shaoul, chief executive at Marketfield Asset Management, with $US9 billion under management.
As of Tuesday, large money managers and hedge funds held a record number of bets on lower gold prices, according to weekly data from the Commodity Futures Trading Commission released on Friday. While speculative investors still hold more bets on higher gold prices than lower ones, that gap has narrowed to its lowest level since 2007.
Quarterly financial filings released Wednesday showed that large hedge funds have again cut back their holdings of gold-backed exchange-traded funds, which buy and store gold on investors’ behalf. Institutional investors like hedge funds accounted for about 75 per cent of total outflows from SPDR Gold Trust, the world’s largest gold ETF, according to Commerzbank.