Investors have recently been shunning gold exchange traded products, including the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU), but some market observers believe that trend may not last much longer.

Last month, investors pulled money from gold ETFs.

“Holdings in global gold-backed ETFs and similar products fell by 49.3t to 2,434t in June, pushing assets under management (AUM) in US dollars down by 2.1% relative to May,” according to the World Gold Council (WGC). “Investors seemed to shrug off poor equity market performance and escalating global trade tensions, pushing the gold price down by 4.2% in June.”

Some signs point to gold buyers returning to the market after the summer is over.

“Gold’s decline may also start to attract contrarian investors. Bank of America Merrill Lynch’s monthly fund managers’ survey showed that a record number of managers, 17 percent, saw gold as undervalued. BofA strategists said it would be a contrarian buy,” according to CNBC.

The Dollar, Gold & China

Commodities, including gold, are denominated in dollars, meaning that as the greenback strengthens, commodities often do the opposite. The inverse relationship between gold and the dollar has recently been on display.

“The dollar’s strength is also in sharp contrast with the Chinese yuan, which has sunk to a new one-year low against the dollar on trade worries and has now become correlated with gold,” reports CNBC. “For gold to make a turn, the dollar may have to stop rising, either on positive trade developments, a slowdown in Fed rate hikes — or a really negative development in trade.”

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