Gold is on a four-month losing streak, a slide hampering major gold exchange traded products, including the SPDR Gold Shares (NYSEArca: GLD). Fresh data from the World Gold Council (WGC) suggest gold inflows slowed in the second quarter.
“ETF inflows have steadied at low levels in recent quarters, making for weak y-o-y comparisons. Q2 jewellery demand dipped 2% to 510.3t, largely due to a weaker Indian market,” said the WGC. “The pace of central bank buying also slowed in Q2 (-7%). Bar and coin demand was virtually unchanged as growth in a few key markets cancelled out weakness elsewhere.”
GLD is the world’s largest gold ETF by assets and is off about 7% year-to-date. Essentially all of that loss was accrued in the second quarter.
Some gold market observers believe the yellow can firm up and trend higher next year as the dollar retreats. At least one gold bull believes bullion could return to $1,400 for the first time since 2013. The current environment, characterized by economic growth and heightened inflation expectations, provides an ideal backdrop for investors to consider the benefits of real assets.
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“Inflows were 46% lower y-o-y. European-listed funds saw decent inflows we believe due to uncertainty stemming from Italian elections and the monetary policy outlook. But holdings of North American-listed funds fell by 30.6t as investors focused on domestic economic strength,” according to the WGC.
Investors pulled $1.06 billion from GLD in the second quarter. Year-to-date, the fund has seen $1.54 billion worth of outflows.
“Gold used in electronics continues to thrive due to enduring demand for smartphones, games consoles and automotive electronics,” said the WGC. “Stronger demand in China and Iran – fuelled by increasing geopolitical tensions with the US – were offset by falls in Turkey, India and Europe, where local prices remained elevated.”
Global central banks bought 89.4 tonnes of gold in the second quarter, down 7% year-over-year, but gold buying by central banks in the first half of 2018 was the highest since 2015, according to the WGC.
For more information on the gold market, visit our gold category.
Tom Lydon’s clients own shares of GLD.