Gold sales from Soros reveal 12-year bull run decay

Gold’s worst start to a year in a quarter century and the biggest sales by investors on record are increasing concern that bullion’s longest rally since the end of World War I is ending.

Investors sold 106.2 metric tons valued at $5.4 billion from exchange-traded products in February, the most since their creation in 2003, data compiled by Bloomberg show. Another 26.1 tons was cut since then. Credit Suisse Group AG and Barclays Plc say the 12-year rally will peak in 2013 and billionaire George Soros reduced his stake in the biggest ETP by 55 percent in the last quarter. Prices are within 5% of a bear market after the longest run of monthly losses since 1997.

Hedge funds are now their least bullish since 2007 as economies accelerate and Federal Reserve policy makers review stimulus. Bullion as much as doubled after central banks, led by the Fed, started buying more than $3.5 trillion of debt from December 2008 to restore growth. With global equities at a four-year high and the dollar near its strongest in seven months, eight of 13 analysts surveyed by Bloomberg said they expect lower average gold prices in 2014 than this year.

“There is a belief that the world economy is improving,” said John Toohey, a San Antonio, Texas-based vice president of equity investments at USAA Investments, which manages more than $54 billion of assets. “We are especially seeing the signs in U.S. and that may at some point lead to higher interest rates. It seems as if the fast money is moving out of gold.”

Worst Start

Gold slid 5.6% to $1,581.55 an ounce in London this year by yesterday’s close, the worst start since 1988. It traded at $1,594.98 today and averaged a record $1,669 last year. The Standard & Poor’s GSCI gauge of 24 commodities rose 0.3% since the start of January and the MSCI All-Country World Index of equities gained 6.3%. Treasuries lost 1.1%, a Bank of America Corp. index shows.

Goldman Sachs Group Inc. reduced its three-month forecast by 12% to $1,615 on Feb. 25 and expects $1,550 in a year. Gold is “significantly overvalued” and unlikely to return to its September 2011 record of $1,921.15, Credit Suisse said Feb. 1. The bank, along with Barclays Plc, Societe Generale SA, Natixis SA, BNP Paribas SA, ABN Amro Bank NV, Danske Bank A/S and TD Securities Inc., is predicting lower average prices next year than in 2013.

About $6.8 trillion was added to the value of global equities since November as China accelerated for the first time in two years. Economists surveyed by Bloomberg expect U.S. growth to gain every quarter this year and the International Monetary Fund predicts global expansion will climb to 3.5% in 2013 from 3.2% in 2012. U.S. unemployment fell to a four-year low of 7.7% last month, as job growth surged from automakers to builders to retailers.

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