Investors dump gold

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 BlackRock Inc.'s 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.

DROP IN PRICE

The price of gold fell more than 5% in February to $1,590 an ounce. The decline continued last week, with the metal trading at around $1,577 an ounce last Thursday. 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. Commodity strategists Damien Courvalin and Jeffrey Currie of The Goldman Sachs Group Inc. slashed their three-month target for gold to $1,615 an ounce, from $1,825, according to a Barron's report.

RISK PREMIUM REDUCED

“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,” they wrote. Gold hit a record high of $1,921.15 an ounce during the debt ceiling throw-down in September 2011. 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%.