“The equity trade is looking attractive because the fundamentals in the U.S. economy continue to improve,” John Stephenson, a senior vice president and portfolio manager who helps oversee C$2.8 billion ($2.74 billion) at First Asset Investment Management Inc. in Toronto, said in a telephone interview. “It’s been a great 12-year run, but there’s increasingly less reason to be in gold.”

Gold, which typically doesn’t pay interest or generate profits on its own, has traditionally become more popular when investors are concerned that values of other assets will be eroded by inflation.

‘Bubble’

“If you think about the intrinsic value of gold, there’s not a lot,” Guy Debelle, assistant governor at Australia’s central bank, which owns 79.9 tons, said at a business lunch in Canberra on April 16. “Gold often has a high price because people believe that other people believe that it’s worth a lot. When you describe other markets like that, the word ‘bubble’ gets thrown about.”

Individual investors added $19.5 billion this year to mutual funds holding U.S. equities, after removing $400 billion in the previous four years, according to the Washington-based Investment Company Institute.

“Since the opportunity cost to hold gold was very high, people moved to the more remunerative assets like equities and cash,” said Walter “Bucky” Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Ala.

Remaining Bullish

Some investors remain bullish. Billionaire John Paulson, 57, is sticking with his bet on higher prices. He started 2013 with about $9.5 billion invested across his hedge funds, of which about 85 percent is invested in gold share classes. This year’s slump through April 15 erased $1.5 billion of his personal wealth, on paper. Paulson is sticking to the thesis that the metal is the best hedge against inflation and currency debasement as countries pump money into their economies, according to the New York-based firm that manages about $18 billion.

“The outlook for gold for us is really positive in the long term,” Catherine Raw, a fund manager in London at BlackRock Inc., which oversees about $3.8 trillion globally, said in an interview yesterday on Bloomberg Television with Francine Lacqua. “The probability of inflation over the next five years is higher, not lower, than it was last year. Other things, such as cash losing money, the Cyprus event, savings being targeted, means people are looking for alternatives.”

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