Gold heads for worst slump since March 2009 as holdings contrac

   Bullion for June delivery dropped 0.8% to $1,376.30 an ounce on the Comex in New York, also lower for a seventh day in the worst slump since March 2009. Photo: AFP
Bloomberg :Live Mint  :  Fri, May 17 2013. 10 13 AM IST

Gold, which has retreated 18% this year, will trade at $1,100 in a year, according to Credit Suisse Group

London: Gold declined for a seventh day in the worst slump since March 2009 as holdings in exchange-traded products shrank, the dollar gained and a US Federal Reserve policymaker said that stimulus may be reduced within months.

Bullion for immediate delivery lost as much as 0.6% to $1,377.85 an ounce and was at $1,379.60 at 12:02 pm in Singapore. The metal, which fell to $1,369.85 on Thursday, the lowest since 18 April, is heading for a second weekly loss.

Gold has retreated 18% this year, falling into a bear market last month, as the dollar rallied 5.2% against a six-currency basket amid prospects for a US recovery and reduced stimulus from the Fed. Holdings in ETPs have lost 16% in 2013, data compiled byBloomberg show. Gold will trade at $1,100 in a year, according to Credit Suisse Group AG.

Gold keeps flowing out of the ETFs and that’s going to depress prices, said Wang Xiaoli, chief investment strategist at CITICS Futures Co., a unit of China’s biggest listed brokerage. You’ll get some buyers on the way down but that’s not going to be enough to stop the downward momentum.

Bullion has tumbled as some investors lost faith in the metal as a store of value and shifted into other assets including equities, sending US stock indexes to records. Assets in the SPDR Gold Trust, the largest bullion-backed ETP dropped to 1,041.42 metric tons on Thursday, the least since March 2009, according to data on the company’s website. Filings this week showed Soros Fund Management LLC and BlackRock Inc. were among funds that cut stakes in the SPDR in the first quarter.

Gaining strength

Reserve Bank of San Francisco president John Williams said on Thursday that the Fed within months may begin slowing the pace of its $85 billion in monthly bond-buying amid signs the economy is gradually gaining strength. The program could be ended late this year if all goes as hoped, he said in a speech.

Bullion for June delivery dropped 0.8% to $1,376.30 an ounce on the Comex in New York, also lower for a seventh day in the worst slump since March 2009. Seventeen analysts surveyed by Bloomberg expect prices to fall next week, with eight bullish and three neutral, the highest proportion of bears in two weeks.

Gold is going to get crushed, as inflation fails to accelerate and with the worst risks to the global economy waning, Ric Deverell, head of commodities research at Credit Suisse Group AG, said on Thursday. The US consumer-price index fell 0.4% last month, the biggest drop since December 2008, Labor Department data showed.

Silver dropped 0.5% to $22.5875 an ounce, set for a second weekly decline. Platinum lost 0.2% to $1,476.35 an ounce, also heading for a second week of losses. Palladium declined 0.2% to $737.80 an ounce, paring a fourth week of gains that’s the best run since February.