Gold positions slump as $55 billion erased from funds

ETP Holdings

Gold holdings in global ETPs dropped 533.3 metric tons this year. Investors may sell a further 285 tons in 2013, Societe Generale said in a June 17 report. Assets in the SPDR Gold Trust, the biggest bullion ETP, slumped below 1,000 tons for the first time since February 2009 last week. Prices will drop to an average of $1,200 in the fourth quarter, Societe Generale forecasts. Credit Suisse sees the metal at $1,100 in 12 months, Ric Deverell, head of commodities research at the bank, said on June 20.

Inflation will remain a threat even with the end of the Fed’s bond buying because of the unprecedented money printing by central banks around the world, boosting the appeal of gold, said John Kinsey, who helps manage about C$1 billion ($964.7 million) of assets at Caldwell Securities Ltd. in Toronto.

Japan Stimulus

Japan is making monthly bond purchases of more than 7 trillion yen ($71.67 billion). European Central Bank President Mario Draghi cut the euro region’s main interest rate in May to a record 0.5% and said policy makers were considering a negative deposit rate. Gold priced in yen reached the highest since March 1980 in April.

“Most of the reasons for gold as a reserve currency, as a hedge against inflation, are still there,” Kinsey said. “Everybody is stimulating and everybody has debt problems, and if the economies gain some traction, I think you’re going to see inflation come back.”

Money managers withdrew $506 million from gold funds in the week ended June 19, according to Cameron Brandt, the director of research for Cambridge, Massachusetts-based EPFR Global, which tracks money flows. Total outflows from commodity funds were $374 million, according to EPFR.

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