article 3 months old

Investors Exit Gold ETFs

Commodities | Mar 07 2013

By Jonathan Barratt

Gold looks to be consolidating in a narrow range. It feels as if the metal is torn between those liquidating the metal, searching for higher yielding assets, and those buying the metals because it looks cheap.  As we have mentioned we have always remained concerned that the ETF holding in the metal will become its Achilles heel. So many investors piled into the product when we had significant risk on the table, however as geopolitical/ economic risks start to unwind the reasons to hold the precious metal change.
 
We can suspect that whilst “risk” is subdued, the outflow of gold from ETFs will be an ever-present seller in the market, in much of a similar fashion to the way gold loans offered to the market in the late eighties saw increased sales and depressed prices. It is interesting that the largest gold ETF fund, the SPDR Gold Trust, has logged its ninth day of consecutive outflows. In February the ETF gold market suffered its largest monthly decline in holdings and whilst gold prices in February fell for the fifth straight run since 1997, the metal is starting to be viewed as being cheap and ready for a bounce. We have a neutral bias towards the metal and we look for signs that price pressures or geopolitical risks are coming back on the table before we get serious about a good position.

Chart Point:

Technically the picture for gold remains the same: we are in a tight range and as long as the low at US1535 remains in play this represents good support. Before entering into a long position we would look for a bounce. We suggest the range US1535 through to US1645 is now confirmed and perhaps also the bigger range of US1535 through to US1735. We still like the dips.

 

 
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