ETF Fund Flows Rose as Gold Dropped in Mid-October



Gold dropped

Gold futures for December delivery on COMEX, a commodity division of the New York Mercantile Exchange, slipped below their three-and-a-half-month high. Gold had seen an almost continuous surge in its prices in the past week touching the high of $1,191 per ounce. Gold futures closed at $1,172.80 an ounce on Monday, October 19, 2015. The close is still almost $100 above the lows seen in the July rout.

Silver futures have also seen positive returns, gaining 4.1% on a 30-day trailing basis. The rally in precious metals is likely due to investors’ perception of a delay in the rate hike. The sluggishness in the US markets amid a struggling global economy may be a possible reason for the delay. Amid rising gold prices, Gold ETFs like the SPDR Gold Shares (GLD) saw a surge in their holdings on October 14 and 15. However, Monday saw a fall in GLD. Below is the chart for GLD’s fund flow since January 2013.

Mining companies

Mining companies that have seen rising prices owing to the surge in bullion include major mining giants like Barrick Gold (ABX), Newmont Mining (NEM), GoldCorp (GG), and Sibanye Gold (SBGL). These companies have seen their prices rise on a 30-day trailing basis. The companies together make up 22% of the VanEck Vectors Gold Miners ETF (GDX).

London gold market

In London, a group of five banks including Goldman Sachs Group and Morgan Stanley have asked the commodities exchanges for proposals on how to start standardized central clearing and listed derivatives for the London gold market. London’s precious metals associations said that the banks are trying to make changes that may improve the market. The likely improvements in the London bullion markets may give impetus to precious metals trading.

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