The precious metal does not yield anything, so it is less appealing in rising rate environment.
“Gold doesn’t pay you anything,” Andrew Cole, an investment manager at Baring Asset Management, said in the article. “We’re largely in an environment where people are yield hungry, so you’ve seen flows into bonds and big income assets. It’s also difficult to envisage an environment immediately ahead where we should get concerned about inflation to the extent that it will spark a desire for real assets. Against that environment, gold loses some of its luster.”
Moreover, as the U.S. dollar appreciates, demand for gold, which is traded in USD, has shrunk in foreign markets.
The SPDR Gold Trust (NYSEArca: GLD) saw $11.5 billion in outflows over the second quarter, the iShares Gold Trust (NYSEArca: IAU) lost $1.5 billion and ETF Physical Swiss Gold (NYSEArca: SGOL) saw $238 million in redemptions, according to IndexUniverse data.
For more information on gold, visit our gold category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own GLD.