While precious metals prices were rising, investors have been slowly cutting back on their gold exchange traded fund exposure, which suggests that traders are less risk adverse and the rally in safe-haven bullion could be petering out.
The SPDR Gold Shares (NYSEArca: GLD), the largest physically backed gold ETF, saw bullion holdings diminish 1.2% to 751.96 metric tons Monday, the least amount since November 2008, Bloomberg reports.
Over the past week, investors pulled $370.8 million from GLD, according to ETF.com data. Meanwhile, GLD gained 1.1% over the past week as a global sell-off pushed investors into safe-haven assets. The ETF is now testing its 50-day resistance level. [Safe-Haven Bets Help Gold ETFs Shine]
Gold prices have shown an inverse relationship to equities as the precious metal is used as a safe store of value and as a hedge against volatility. Gold gains, though, were tempered by an appreciating U.S. dollar, which made the metal more expensive to foreign traders.
However, the equities market is rallying off the Oct. 16 low as U.S. corporate earnings helped support the recovery in stocks.
“People are gradually beginning to believe that the stock market is stabilizing,” Michael Gayed, chief investment strategist at Pension Partners LLC, said in the Bloomberg article. “Also, the perception that the U.S. economy is doing well is lowering interest in gold.”
COMEX gold futures were trading just below $1,250 per ounce after rallying from $1,191 at the beginning of October.
Looking ahead, Federal Reserve rate hikes could put pressure on the gold markets. However, with the recent weakness, notably in Europe and China, the Fed could delay rate changes.
“It’s reflective of short-term market anxiety created by recent indications of a global market slowdown, which are likely to delay the timing of hikes in interest rates,” Tim Clark, a private client adviser at New York Securities Ltd, said in the article.
SPDR Gold Shares
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Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of GLD.