Gold dropped to the lowest since May, nearing a bear market, on signs that investors are seeking higher returns in equities as the global economic recovery cuts demand for haven assets. Palladium fell the most since October.
Global holdings of exchange-traded products backed by gold are down 7.4 percent this year, data compiled by Bloomberg show. Prices have fallen 7.4 percent this year, while the MSCI All- Country World Index of equities advanced 5 percent. The metal may continue to decline as the resilience of the financial system to recent developments in Italy and Cyprus suggests reduced risk of a so-called major meltdown, Credit Suisse Group AG said yesterday.
“Equities continue to attract more capital,” David Lee, a vice president at Heraeus Precious Metals Management in New York, said in a telephone interview. “The safe-haven premium for gold also seems to have disappeared with the world not falling apart.”