Gold ETFs Shrug Off Soros, Bear Market

March 12th at 9:24am by John Spence

Gold prices rose sharply Tuesday morning after Jens Weidmann, head of Germany’s central bank, said Europe’s debt crisis is not over but that inflation risks have abated. ETFs that hold the precious metal climbed in premarket action despite worries gold’s 12-year bull market is over as George Soros and other noted investors sell gold.

Gold futures neared $1,600 an ounce after Weidmann’s comments had traders speculating the European Central Bank will continue its monetary easing programs.

“It may be that the comments of Jens Weidmann made the market move …if we manage to push the market convincingly through $1,592, we may see a push towards $1,600 and until the New York market opens we should stay around current levels,” Standard Bank analyst Walter de Wet said in a Reuters article.

Gold ETFs may have helped speed the metal’s decline this year. Investors have pulled more than $5 billion from the largest ETF tracking the precious metal so far in 2013. [Gold ETF Sees Outflow as Prices Slump]

Bullion holdings of SPDR Gold Shares (NYSEArca: GLD) have fallen to the lowest level since late 2012. The ETF currently holds about 1,237 metric tons of gold valued at $62.7 billion.

“Analysts, however, said that the pace at which ETFs investors exit their positions has been easing in the past week, when 21.9 [metric tons] were liquidated,” Reuters reports. “This compared to a 56.7-[metric ton] loss in the previous week, according to Standard Bank.” [Gold ETFs Down as Banks Turn Bearish]

Gold prices rose to a two-week high Tuesday morning as Kitco also attributed to rally to “heavy short covering, bargain hunting and even some fresh safe-haven demand.”

Yet Bloomberg News reports that gold’s worst annual start in over 20 years have raised fears the metal’s longest rally since World War I is drawing to a close.

“Investors sold 106.2 metric tons valued at $5.4 billion from exchange-traded products in February, the most since their creation in 2003 … Another 26.1 tons was cut since then,” according to the report. “Credit Suisse Group AG and Barclays Plc say the 12-year rally will peak in 2013 and billionaire George Soros reduced his stake in the biggest ETP by 55% in the last quarter. Prices are within 5% of a bear market after the longest run of monthly losses since 1997.” [Gold ETFs Fall as Soros Scales Back GLD Investment]

SPDR Gold Shares

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Full disclosure: Tom Lydon’s clients own GLD.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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