Tags: gold | fund | SPDR | outflow

Giant Gold Fund SPDR Sees 3rd Biggest Weekly Outflow after Rout

Thursday, 18 Apr 2013 06:05 PM

The price of gold may have fallen by a record in U.S. dollar terms this week, but the largest exchange-traded fund (ETF) for bullion saw less money outflows than during the 2009 selloff, according to funds tracker Lipper.

SPDR Gold Trust, the world's biggest bullion-backed ETF, was hit by $2.18 billion in net outflow during the week ended April 17, Lipper data on Thursday showed, after the spot price of gold tumbled by 13 percent for that week.

But the ETF had an even bigger outflow during the week to July 29, 2009, when it lost some $2.8 billion in value during the financial crisis.

Its biggest drop in value since was for the week ended Feb. 2, 2011, when some $2.3 billion left the ETF.

"Many may have expected record outflows from SPDR this week, given the phenomenal move in gold prices. What we have shows only the third biggest decline so far," said Matthew Lemieux, who compiled the data for Lipper, a Thomson Reuters company.

Lipper data also showed an outflow of above $435 million in the week to April 17 for ishares Gold Trust, another bullion ETF, the largest decline ever for that fund. But ishares is a much smaller gold ETF, holding just over 200 metric tons of bullion versus SPDR's 1,133 tonnes.

Gold's spot price fell the most on Monday in dollar terms, sliding nearly $130 an ounce, or about 9.0 percent, to a two-year low below $1,322 after a rout across commodity markets sparked by global economic worries. The price has recovered partially since, hovering around $1,388 late on Thursday.

According to Lipper, SPDR had a net outflow of $1.7 billion in March after a drop of more than $3.8 billion in February, its largest decline ever for a month since it begin tracking tracking flows for U.S.-based commodity ETFs in Nov. 2004.

 

END OF GOLD LOVE AFFAIR

U.S. ETF investors' five month-long love affair with gold came to an abrupt end in January as the spot price of bullion began retreating from a peak just shy of $1,700.

Last year, some 70 percent of investments that flowed into U.S. commodity ETFs went into SPDR and iShares. SPDR alone had a net inflow of $5.3 billion and iShares Gold $2.4 billion. The huge cash infusion coincided with a 12th straight year in which gold prices rallied.

Investors rushed into the two ETFs in August when bullion prices began climbing on expectations that the U.S. Federal Reserve would initiate a third round of quantitative easing, or QE3, to boost the economy. Fed monetary policy easing tends to weake the U.S. dollar, compelling investors to find a better store of value, and gold has emerged as the favorite alternative.

As widely expected, the Fed launched QE3, promising to buy $45 billion worth of U.S. Treasury bonds and $40 billion of mortgage-backed securities per month. Fears of a U.S. fiscal crisis through December added to investors' worries, pushing them deeper into gold ETFs.

The trend changed in January after early signs of a stronger economy in the United States, Europe and China, which made investors more willing to take risk. Money began flowing out of gold and into oil, base metals and equities, with U.S. stocks hitting 5-year highs.

Gold came under renewed pressure this year after the Fed suggested it might scale back its bond-buying program.

This week, panic selling descended on the precious metal after Cyprus rolled out a plan to sell its gold to finance its debt, top Wall Street bank Goldman Sachs issued a bearish note on gold and China's economic data suggested stalling growth.

© 2017 Thomson/Reuters. All rights reserved.

   
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The price of gold may have fallen by a record in U.S. dollar terms this week, but the largest exchange-traded fund (ETF) for bullion saw less money outflows than during the 2009 selloff, according to funds tracker Lipper.
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2013-05-18
Thursday, 18 Apr 2013 06:05 PM
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