VINACHEM

Gold, which plunged into a bear market last week, extended a rout to the lowest level sinceApril 2011 on expectations that demand for haven assets willcontract as the global economy improves. Silver slumped.

Gold for immediate delivery dropped as much as 3.9 percent$1,425.75 an ounce and was at $1,444.07 at 11:14 a.m. in Singapore. Prices tumbled 5 percent on April 12, taking lossesto more than 20 percent since the record close in September 2011,and meeting the common definition of a bear market.

Bullion has dropped 14 percent in 2013, after a run of 12annual gains, as data showed that the U.S. recovery was gainingtraction, prompting increased speculation that the central bankwill rein in its unprecedented stimulus program. Holdings inexchange-traded products contracted at a record pace in thefirst quarter, and have fallen for the past nine weeks. The turnin the gold cycle is quickening and investors should sell themetal, Goldman Sachs Group Inc. 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 NV,wrote in a note today. “Other assets will become increasinglymore attractive as the growth outlook improves.”

Gold for June delivery fell as much as 5.3 percent to$1,422.20 on the Comex in New York, and traded at $1,444.40.Futures slumped 4.1 percent on April 12 as Cyprus may sell itsgold holdings to cover possible losses from emergency loans.

‘Key Pillars’

“Some of the key pillars of the gold bull market look likethey’re suffering fatigue,” Peter Richardson, an analyst atMorgan Stanley, said by phone from Melbourne today. “The goldmarket’s probably started to price in the prospect thatbeleaguered members of the euro zone might be forced to sellgold to raise part of the funding, and there are much biggerholders in that category than Cyprus.”

Assets in exchange-traded products backed by gold decreasedto 2,406.16 metric tons on April 12, the least since August,according to data compiled by Bloomberg. They shrank 6.9 percentin the first quarter, the biggest reduction since at least 2004.

Gold-related equities dropped. Newcrest Mining Ltd.(NCM),Australia’s biggest producer, lost 8.2 percent to A$17.92 inSydney, and Zijin Mining Group Co., China’s biggest gold minerby market value, fell 7.6 percent to HK$2.32 in Hong Kong.

“I love the fact that gold is finally breaking downbecause that will offer an excellent buying opportunity,” Marc Faber, publisher of the Gloom, Boom & Doom report, said onBloomberg Television’s “Street Smart” on April 12. “The bullmarket in gold is not completed.”

Pulling Back

The Federal Reserve is buying $85 billion of debt a monthand has said further improvement in the labor market is neededto consider reducing its stimulus. Minutes of the policy makers’March meeting released April 10 showed that several members werein favor of pulling back on the program this year.

U.S. stocks advanced last week, sending the Standard &Poor’s 500 Index to an all-time high, amid optimism thatcorporate earnings growth will continue. The index has more thandoubled from its 12-year low in March 2009, helped by the Fed’sbond purchases and three straight years of profit growth.

Goldman cut its three-month target to $1,530 from $1,615and lowered the 12-month forecast to $1,390 from $1,550,analysts Damien Courvalin and Jeffrey Currie said in the April10 report. While higher inflation may be the catalyst for thenext cycle, that’s probably several years away, they wrote.

Gold dropped today even as the Dollar Index (DXY), a gaugeagainst six counterparts, fell as much as 0.3 percent. Bulliontypically trades counter to the U.S. currency, which hasadvanced 3.2 percent this year.

Soros’s View

Gold has ceased to be the haven for investors after it fellwhen the euro was close to collapse last year, billionaireinvestor George Soros said in an interview with the South China Morning Post published April 8. Soros cut his stake in the SPDRgold fund by 55 percent in the fourth quarter, a filing showed.

“The investment community has barely begun to liquidatetheir holdings,” of gold-related assets, said Stewart Richardson, who helps oversee $100 million as partner and chiefinvestment officer at RMG Wealth Management LLP in London.

Rene Hochreiter, chief executive officer of AllanHochreiter (Pty) Ltd. and the top forecaster in the LondonBullion Market Association’s 2012 poll, predicted in Januarythat gold’sbull market was over as the U.S economy improved.

Cash silver dropped as much as 6.8 percent to $24.24 anounce, the lowest level since November 2010, and was at $24.625.Spot platinum fell as much as 2.8 percent to $1,444.50 an ounce,the lowest level since August. Palladium slumped 3.4 percent to$683.20 an ounce, the lowest since Jan. 9.