Gold’s losing love and lustre

Many experts had predicted gold would pull back, but even the staunchest of bears didn’t expect a slump that would wipe out 30% of the metal’s peak value of $1,921.15 per ounce on September 5, 2011.

To put things in perspective, if you got a $250,000 shirt made entirely from gold that day, it’d now only be worth $175,000.

Read: Faceoff: Precious metals

The precious metal fell 9.2% to $1,395 an ounce Monday, a move that had gold bulls retreating and bullion bashers cutting loose. It may be long before we hear the metal’s fans string the words “gold,” “irreversible run” and “$10,000” in the same sentence.

No doubt, some analysts will continue to point to its safe-haven status and its value as a hedge against volatility. But those down on gold, which include portfolio managers, economists and equity managers, argue the glory days are in the rearview mirror.

Read: Gold getting precious little investor love

The yellow metal’s given up over $500 from its record high in 2011. And a slew of factors are ensuring it stays at that level, or falls further.

Central banks show no signs of changing current loose monetary policies. That will suppress inflation – the other driver of bullion prices – for the foreseeable future.

As well, signs of strength in global economy, improving investor sentiment, and a continuing equities bull run are working collectively to dampen investor desires.

And as growing numbers of economic indicators suggest the recovery is solidifying, central banks’ bullion buying will likely wind down.

The overall shift away from defensive assets and falling prices have had a knock-on effect on gold ETFs, which now are facing a sell-off.

Read: Gold’s had its day in the sun: economists

Experts find it particularly disconcerting that for the first time since the introduction of gold ETFs in 2003, their price is falling in tandem with that of gold.

Another indication of investor aversion, according to a report in FT.com, is that ETFs have shed 140 tonnes of bullion since the start of this year. The trend is likely to last as investors continue to flock to equities for a fear of missing out on that rally.

The great rotation has also shaken up beliefs about ETFs. As this FT report says, the latest slip sits at odds with the theory that ETF markets are driven by longer-term allocation rather than short-term trading.

For investors, until the next event triggers a stampede back into gold, its merits will pale in comparison to equities or real estate.