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Is the gold party over?

A record $4.1 billion yanked from gold ETFs in February

Mar 5, 2013 @ 1:37 pm

By Jason Kephart

Investors fled from gold exchange-traded funds in record numbers last month as the economy continued to improve.

A record $4.1 billion was pulled from gold ETFs in February, the largest single month of net outflows for the group ever. It's almost twice the previous high — $2.6 billion in January 2011 — according to the BlackRock ETP Landscape report.

The largest outflows came from the $63 billion SPDR Gold Shares ETF (GLD), which bled $3.7 billion, according to IndexUniverse LLC.

The price of gold fell more than 5% in February, to $1,590 an ounce. The decline has continued this week, with the yellow metal trading at around $1,576 an ounce early Tuesday morning.

The mass exit coincided with signs of a strengthening dollar, continued growth in the U.S. economy and the apparent lack of political risk, all of which paint a dire picture for gold.

“We are reducing the U.S. fiscal policy risk premium embedded in our near-term gold forecast, as the Republicans in Congress seem to have given up on the idea of using the debt ceiling to force additional spending cuts, reducing sharply the risk that further fiscal drag would push the U.S. economy into a renewed recession. This shift alone was worth 6% of our three-month gold price forecast,” Goldman Sachs & Co. Inc. commodity strategists Damien Courvalin and Jeffrey Currie wrote last week.

Gold hit its hit a record high of $1,921.15 an ounce during the debt ceiling throw-down in September 2011.

Mr. Courvalin and Mr. Currie slashed their three-month target-price for gold to $1,615 an ounce from $1,825 an ounce last week, , according to a recent Barron's report.

Gold wasn't the only precious metal to have a February to forget. Silver declined by almost 10%, platinum fell 6.5% and palladium fell 4%.


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