Gold finally loses some of its glitter

Gold, which plunged into a bear market last week, extended its slide yesterday en route to its lowest level since April 2011 on expectations that demand for haven assets will contract as the global economy improves. Silver also slumped.

Gold for immediate delivery dropped as much as 3.9 percent to $1,425.75 an ounce and was at $1,448.25 at 1 p.m. in Singapore. Prices tumbled 5 percent on April 12, taking losses to more than 20 percent since the record close last September and meeting the common definition of a bear market.

Bullion has dropped 14 percent in 2013 after rising for 12 years, as data showed that the U.S. recovery was gaining traction, prompting increased speculation the central bank will rein in its unprecedented stimulus program. Holdings in exchange-traded products contracted at a record pace in the first quarter and have fallen for the past nine weeks. The turn in the gold cycle is quickening and investors should sell the metal, Goldman Sachs Group said in an April 10 note.

“The demise of gold is still at an early stage,” Georgette Boele, a commodities strategist at ABN Amro Group, wrote in a note yesterday. “Other assets will become increasingly more attractive as the growth outlook improves.”

“Some of the key pillars of the gold bull market look like they’re suffering fatigue,” Peter Richardson, an analyst at Morgan Stanley, said by phone from Melbourne today. “The gold market’s probably started to price in the prospect that beleaguered members of the euro zone might be forced to sell gold to raise part of the funding, and there are much bigger holders in that category than Cyprus.”

Assets in exchange-traded products backed by gold decreased to 2,406.16 metric tons on Friday, the least since August, according to data compiled by Bloomberg. They shrank 6.9 percent in the first quarter, the biggest reduction since at least 2004.

“I love the fact that gold is finally breaking down because that will offer an excellent buying opportunity,” Marc Faber, publisher of the Gloom, Boom & Doom report, said last week. “The bull market in gold is not completed.”

Bloomberg