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Friday, May 2, 2014
Gold price drops as holdings of top ETF fall to 5-year low
The gold price fell by more than $10 on Thursday after confidence in the US economy expressed by the Federal Reserve overshadowed the escalation of the conflict in Ukraine.
On the Comex division of the New York Mercantile Exchange, gold futures for June delivery last traded at $1,285.20 an ounce, near the lows of the day and down $11 from yesterday's close.
Gold's status as a hard asset and safe-haven during times of turmoil did not translate into buying despite news that Ukraine has re-instated military conscription after saying that it is in danger of losing the east of the country to pro-Russian forces.
The US central bank on Wednesday decided to continue to scale down its stimulus program following indications that growth in economic activity picked up recently after the weather-related slowdown in the first quarter saw GDP growth barely positive at 0.1%.
The news boosted the dollar and diminished gold's allure as a hedge against inflation and storer of wealth.
After an atrocious 2013 when GLD recorded only 17 days of inflows and 540 tonnes left the fund, the tide seemed to have turned in 2014
Investors also continued to pull money out of the SPDR Gold Trust (NYSEARCA:GLD), the world's largest physically-backed gold ETF accounting for over 40% of total holdings in the industry.
Holdings in GLD dropped more than 2 tonnes to 785.55 tonnes or 25.2 million ounces on Thursday, the lowest level since January 2009 and down 24 tonnes during April.
After an atrocious 2013 when GLD recorded only 17 days of inflows and almost 540 tonnes left the fund, the tide seemed to have turned early in 2014.
But after peaking at 821 tonnes in March, GLD became a one way bet again.
Buying of gold ETFs trust – fondly referred to as the people's central bank – since 2003 when the first of its kind was launched in Australia played a huge part in gold's 12-year bull run.
Gold bullion holdings in global ETFs hit a record 2,632 tonnes or 93 million ounces in December 2012.
But last year the world's more than a 50 physically-backed exchange-traded gold funds and scores more gold futures-based trusts experienced net redemptions in excess of 800 tonnes collectively.
As gold declined 28% over the course of 2013 precious metals investment vehicles suffered depreciation in value of close to $80 billion.