Gold exchange traded products, including the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL), are retreating as highlighted by a one-month decline of about 5% for these funds.
However, investors are not bailing on gold ETFs with data suggesting some investors are using the recent decline as a buying opportunity.
“Large-scale speculators have been reducing exposure to gold on derivatives markets, but retail and institutional investment in gold-backed exchange traded funds (ETFs) continues to grow,” reports Frik Els for Mining.com. “New data from the World Gold Council shows ETF vaults now hold around 2,357 tonnes after three straight quarter of net inflows this year.”
Gold has enjoyed greater demand in a low interest-rate environment as the hard asset becomes more attractive to investors compared to yield-bearing assets. However, traders lose interest in gold when rates rise since the bullion does not produce a yield.
“Despite the pullback in the gold price during September, North American gold investors poured money into gold ETFs, offsetting weakness elsewhere. Inflows for North American-based ETFs totalled 36 tonnes during the month, while Europe recorded net redemptions of 12 tonnes and Asia 1.7 tonnes,” according to Mining.com.
Moreover, in the face of a stronger dollar and speculation that the Federal Reserve could raise interest rates over the mid- and long-term, gold prices could still move modestly higher with some help from increased demand out of the emerging markets, namely China and India.