Gold price knocked by more ETF sales

New York (Nov 10)  SPDR Trust is the largest of the gold-backed ETFs and has borne the brunt of the sales. SPDR’s gold holdings are now at a level not seen since Lehman Brothers collapsed.

Gold remained friendless as sales both through exchange traded funds and on the futures markets weighed the price down.

Ever since the US Federal Reserve indicated an interest rate rise was likely this year, funds and large institutions have put their selling boots on.

SPDR Trust is the largest of the gold-backed ETFs and has borne the brunt of the sales.

At 666.11t, SPDR’s gold holdings are now at a level not seen since Lehman Brothers collapsed, according to Investec, and have fallen for seven days running.

“While there are always arguments for and against holding bullion, like most commodity assets it simply remains hamstrung by the outlook on US interest rates and resultant US$ strength,” the broker commented.

Meanwhile, hedge funds have been cutting their futures positions to record lows according to Bank of America Merrill Lynch’s monitor.

Hedge fund managers dumped long/buy contracts in the week to 4 November at the fastest rate since the broker started collecting the data in 2006.

Spot gold was US$5 lower at US$1,087.

Even so, gold was faring a lot better than its near neighbours, with silver dropping to a more than five week low of US$14.36 while platinum slid below US$900 to US$895.

Like gold, platinum has been badly affected by reduction in ETF holdings, while the saving of South African miner Lonmin through a rescue rights issue yesterday has meant 15% of global capacity will remain on stream said analysts.

Source: ProactiveInvestor