Investors are dropping gold exchange traded funds like a hot potato. Consequently, global gold ETFs are experiencing their first annual decline in holdings since they began trading.
Of the 14 largest physical gold ETFs, bullion holdings plunged 31% to 1,813.3 metric tons since the start of the year as prices dropped by the most since 1981, Bloomberg reports. Analysts project investors will continue to pull out of gold, with ETFs’ bullion holdings diminishing by 311 tons next year.
The slump is gold reflects investors’ lack of faith in the commodity as preserver of wealth, given the low inflation rate environment and growing speculation on Fed tapering. [Glum Technical News for Gold ETFs]
“All the bullish factors we had pushing gold higher in the last 12 years are now going into reverse,” Robin Bhar, an analyst at Societe Generale, said in the article. “There will be more ETF selling in 2014 as the price goes lower.”
While demand for bullion has declined in the States, consumption in China, which is poised to outpace India as the largest buyer this year, could increase to a record 1,000 tons this year, according to the World Gold Council.
“Lots of metal has been migrating from west to the east,” Peter Sorrentino, a manager at Huntington Asset Advisors, said in the article.
However, the demand for physical bullion in China has not translated over to “paper,” gold-related ETFs.
“I don’t think the Chinese ETFs will be as popular as international ETFs such as SPDR, or physical gold,” Chen Min, an analyst at Jinrui Futures in Shenzhen, said in a Reuters article.
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