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ETFs Backed by Precious Metals Continue to Be Dumped

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Gold is at a six-year low

The price of gold has almost bottomed to a new low, the lowest price witnessed in nearly six years now. Gold futures for the most active month traded on COMEX closed at $1,080.90 an ounce on Friday, November 13, 2015. Gold prices have fallen steeply in the past 15 days. Eight of the last ten trading days witnessed a decline in prices.

Gold ETFs such as the iShares Gold Trust ETF (IAU) and the SPDR Gold Shares ETF (GLD) have fallen marginally in the past week, by 0.48% and 0.52%, respectively. However, there have been withdrawals from these funds in November. Outflows from the funds backed by precious metals have touched $1.1 billion in November alone. The chart above shows the flow of funds in the GLD ETF from the year 2013.

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Hawkish stance

Following the Fed’s hawkish stance in the October meeting and Fed chair Janet Yellen’s confirmation that a rate hike is almost definite, the price of gold has plummeted and touched a six-year low. Prior to the October meeting, investors seemed bullish on precious metals and increased their long bets on the ETFs. However, that outlook has reversed, as higher rates curb the appeal of non-interest bearing gold. Gold touched its July low of $1,073 an ounce on Thursday, November 12.

In the past five trading days, mining companies showed a mixed performance. With a marginal gain in gold futures of 0.30%, a few companies retreated while a few others surged. Alamos Gold (AGI) and New Gold lost 9.2% and 6.9%, respectively, on a five-day trailing basis, while GoldCorp (GG) and Primero Mining (PPP) gained 4% and 8.4%, respectively, on the same basis. These four companies make up 11.1% of the VanEck Vectors Gold Miners ETF (GDX).

 

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