August Exodus From Gold ETFs

Gold notched its fifth consecutive monthly loss in August, prompting investors to depart gold exchange traded funds, such as the SPDR Gold Shares (NYSEArca: GLD). GLD is the world’s largest ETF backed by physical holdings of gold.

The strengthening U.S. economy is translating to a stronger dollar, which is often a problem for gold. Gold, like other commodities, is denominated in dollars, meaning it has an inverse relationship to the U.S. currency. August was the third consecutive month of declines for holdings at global gold ETFs.

“Holdings of gold by global exchange-traded funds and similar products fell by 40 tonnes during August, the World Gold Council reported Thursday,” according to Kitco News. “Holdings now stand at 2,353 tonnes after three straight months of declines. The drop was also coupled with softer gold prices and assets under management fell by 3%. For the year to date, ETF holdings are now down by 18.5 tonnes.”

Investors have been shunning physical assets like gold in face of further interest rate tightening out of the Federal Reserve amid a robust U.S. economy. Fed Chairman Jerome Powell said earlier in August that gradual rate hikes will come, and with inflation still low, there was little concern over the economy overheating.

Rough Month for Gold

“Gold ETFs based in North America posted outflows of 44 tonnes. Those in Europe grew by four tonnes, while Asian ETFs added two tonnes. Other regions posted a reduction of two tonnes,” reports Kitco.

Related: Gold Was the Most Hated ETF Play of August