* Several managers plan to cut exposure to gold
* Industrial metals considered more attractive
* See small gold allocation as insurance policy
By Jan Harvey
LONDON, Feb 4 (Reuters) - Fund managers' ardour for gold is cooling as the threat of a catastrophic event in the world economy recedes and expectations of a gradual economic recovery grow, fuelling demand for other assets.
A number of leading portfolio managers have reduced their exposure over the past year or plan cuts this year in response to the receding threat of a euro zone collapse or U.S. debt default.
Economic data has improved recently in both the United States and the euro zone. Although a Reuters poll this month still pointed to soft growth on both sides of the Atlantic in 2013, the world economy is expected to perform better this year.
That optimism is rejuvenating interest in other assets, such as equities. According to Lipper, net flows to U.S.-based equity funds in the first two weeks of 2013 were, at $11.3 billion, the biggest fortnightly inflow since April 2000.
Commodity fund managers said this month that they currently favour industrial metals such as copper and iron ore, as well as platinum and palladium, over gold.
"People are trying to understand whether we're in a recovery scenario, or whether there is another speed bump out there," Clive Burstow, a fund manager at Baring Asset Management, said.
"I think you have to have an exposure to gold, because there are still headwinds ... but you don't need as big an exposure as you did when you thought the world was ending."
Burstow said he will probably trim his fund's exposure to gold over the next year.
QE IMPACT
Neil Gregson, manager of the J.P. Morgan Natural Resources Fund, still sees solid support for gold prices but said that he expects to hold or even reduce his fund's holdings.
"Our investments have already gone down on the gold side," Gregson said, estimating the fund's exposure to gold at about 24 percent, against 30 percent this time last year.
"It's still a significant part of our portfolio, but looking at other miners, such as copper and iron ore, we think there are more opportunities there compared with gold."
The price of gold was driven sharply higher as monetary authorities around the world fought to stave off the worst effects of the financial crisis by dropping interest rates and flooding their economies with cheap money.
That benefited gold by boosting its appeal as a safe store of value and a hedge against inflation.
Gold's positive reaction to quantitative easing (QE) - essentially the injection of more cash into a country's economy by its central bank - has become shorter and shallower with each round. During the United States' first round of QE, from November 2008 to March 2010, gold rose more than 30 percent.
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