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Are ETF flows sending a warning signal on gold?
Technical analysts trying to guess gold’s next move are closely monitoring bullion holdings and flows in gold exchange traded funds as key sentiment indicators.
Holdings in bullion-backed gold ETFs hit an all-time high of about 2,361 metric tons on Dec. 14, but fell for a fifth straight day on Wednesday to the lowest level since Nov. 17, Bloomberg reported Thursday.
“Declines in ETF holdings may affect the price in the short-term,” Colin Hamilton, an analyst at Macquarie Group, told Bloomberg.
It’s difficult to pin down just how much the introduction of ETFs backed by gold and other precious metals in recent years has fueled the dramatic rally. However, there is no doubt ETFs have made it much easier to buy gold and attracted new entrants to the market.
The ETF shares are backed by bullion held in vaults, and remove the need to transport, store and insure precious metals.
Inflows to gold ETFs have fallen by more than 50% this year and may not recover in 2012 as investors look to other asset classes, Reuters reported Thursday.
SPDR Gold Shares (GLD), the largest gold ETF, is on track for a net annual outflow of 413,000 ounces, according to the story.
The $65.5 billion ETF currently holds nearly 40.8 million ounces of gold. The fund is trying to get back above its 200-day moving average, a closely-followed technical indicator.
“Investor interest seems to be maturing, so you’re not seeing such strong flows into the physically backed ETF,” said Barclays Capital analyst Suki Cooper in the report.
Still, gold ETFs have only seen slight outflows recently. In other words, there isn’t even a hint of panic.
Gold ETF bullion holdings rising to a recent high despite the price pullback to $1,600 an ounce shows long-term investors are staying the course, some analysts say.
“Global ETF investor positions have continued to trend up in both gold and silver, reflecting the fact that long term price supports such as negative real interest rates, currency debasement and sovereign/financial sector default risk, and rising emerging market/central bank demand remain embedded in the 2012 outlook,” said Daniel Wills and Nicholas Brooks at ETF Securities in a weekly precious metals update.
However, the large price swings in gold recently may have shaken out some skittish investors.
“Gold prices have been moving so violently that its safe-haven, store-of-wealth status has been dented somewhat,” said VM Group analyst Carl Firman, Reuters reported. “I think you have seen some of the more nervous investors in the ETFs pull out because of that.
” The direction of the U.S. dollar will have a big impact on gold ETFs in 2012. PowerShares DB US Dollar Index Bullish (UUP) is an ETF hitched to the greenback’s movements against a basket of currencies.
Courtesy:seekingalpha
Tags: Gold analysis, Gold ETFs, Gold future prices, Gold futures, Gold investment, Gold news, Gold price, gold price forecast, Gold prices, gold shares, gold stock, gold stocks, price of gold, Spot gold, Spot gold price
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