With investors focused on riskier equities and the S&P 500 hitting a new intra-day record high, gold exchange traded funds are losing their safe-haven appeal.
Physically backed gold ETFs, including the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL), decreased about 2.2% Tuesday, failing their 200-day resistance level. The gold ETFs, though, are still up around 7.2% year-to-date. [ETFs to Watch as Ukraine, Russia Tensions Escalate]
COMEX gold futures are now hovering around $1,267 per ounce, the lowest level since February.
Despite continued fighting in eastern Ukraine, the election of Petro Poroshenko, a billionaire chocolate manufacturer, to the Ukrainian presidential office provided some political stability, causing bullion traders to feel “some Ukraine fatigue,” Edel Tully, precious metals analyst at UBS, said in a Financial Times article.
Meanwhile, investors shifted away from the safety of gold Tuesday as rising U.S. consumer confidence and a stronger U.S. dollar fueled a rally in riskier equities, pushing the S&P 500 Index to a new intra-day high.
“The surge in the equity market continues to push gold lower,” George Gero, a vice president and precious-metal strategist at RBC Capital Markets, said in a Bloomberg article. “The fear premium because of Ukraine has lessened.”
Some market analyst expect further declines in gold prices.
“There is a disconnect between sentiment and market positioning – sentiment is even more bearish than today’s move suggests,” Tully added.
Gold speculators have cut their bullish positions on gold for the second consecutive week to 90,358 contracts as of May 20. Physical bullion holdings in gold-related ETFs have also dropped to their lowest since 2009. Year-to-date, GLD held around a high of around 821.5 tons of gold at the end of March, but the ETF is now backed by 776.9 tons of gold, according to State Street Global Advisors data.
SPDR Gold Shares
For more information on the gold markets, visit our gold category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of GLD.