Gold bears revived as rout resumes after coin rush

Gold bears are dominant again after prices resumed their slump and billionaire George Soros joined investors selling holdings in exchange-traded products that have retreated to a two-year low.

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. The analysts were divided a week ago after gold rebounded as much as 13% from the two-year low of $1,321.95 an ounce on April 16. ETP holdings slid 16% to 2,207.1 metric tons this year, the lowest since July 2011, data compiled by Bloomberg show.

Prices that rallied as much as sevenfold in the past 12 years entered a bear market last month after some investors lost faith in gold as a store of value and equities rallied on mounting confidence the U.S. economy is improving. The slump spurred a surge in demand around the world, with coin purchases from the U.S. Mint rising to a three-year high in April. This month’s sales are on course to be 65% lower and global ETP holdings increased on just one day in the past six weeks.

“The momentum has slowed significantly,” said Jeremy Baker, a senior commodities strategist who oversees about $800 million of assets at Harcourt Investment Consulting AG in Zurich and who forecasts prices may drop as low as $1,200 in six months. “The safe haven has definitely lost its gleam. We are in a declining phase here.”

Standard & Poor’s

The metal fell 18% to $1,371.57 in London this year and is trading 29% below its September 2011 record. Gold is the second-worst performer this year in the Standard & Poor’s GSCI gauge of 24 commodities, after silver. The S&P GSCI dropped 2.4% since the start of January and the MSCI All-Country World Index of equities rose 11%. Treasuries returned 0.1%, a Bank of America Corp. index shows.

Demand in India and China, the two biggest gold consumers, surged after prices slumped. The U.S. Mint, which said April 23 it ran out of its smallest gold coins, sold 42,000 ounces of American Eagle bullion coins so far in May, compared with 209,500 ounces in April, its website shows. Prices may fall to $1,100 in a year as the metal “is going to get crushed,” Ric Deverell, head of commodities research at Credit Suisse Group AG, told reporters in London yesterday.

Bullion fell in six of the past seven months as the S&P 500 Index of U.S. stocks rose to a record, the dollar reached a nine-month high against six major currencies and unprecedented money printing by the world’s central banks failed to spur inflation.Expectations for consumer price increases, as measured by the break-even rate for 10-year Treasury Inflation Protected Securities, fell 8.4% this year, reaching an eight-month low yesterday.

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