Consolidating gold price prompts trickle into ETFs

A bounce back on equity markets, oil at fresh five-year lows and a stronger dollar did little damage on gold markets Thursday with the metal hovering near 7-week highs.

On the Comex division of the New York Mercantile Exchange gold for February delivery was changing hands for $1,226.20 an ounce in afternoon trade, down $3.10 or 0.3% from Wednesday close after recovering from a dip to $1,216 an ounce shortly after the open.

The oil price, which usually move in tandem with gold, closed at $59.95 on Thursday, hitting the lowest level since July 2009.

The US dollar, which has an inverse relationship to gold, advanced 0.5% to within shouting distance of 8-year highs against the currencies of its major trading partners hit last week.

US equities also recovered lost ground with triple digit gains for the Dow Jones and a nearly 1% gain on the broader S&P 500 index and the tech-laden Nasdaq after strong retail sales figures rekindled hopes for accelerating growth.

Gold's gains since hitting four-year lows early November top 7% and the metal's resilience despite the negatives has enticed some investors to return to physical gold-backed ETFs after months of relentless outflows.

Holdings in the bellwether exchange traded funds backed by physical gold – SPDR Gold Shares (NYSEARCA:GLD) which represents nearly 50% of the gold-backed ETF market – jumped by just under 3 tonnes to 724.8 tonnes or 28.6 million ounces yesterday, the best day since July.

Bloomberg quotes Tai Wong, the director of commodity products trading at BMO Capital Markets in New York as saying "some short-term institutional buyers" are jumping back into the market and "stimulus measures announced in various countries are bringing some investors" back.

GLD inflows for the month has now reached 7.2 tonnes, but the performance so far in 2014 remain dismal with investors pulling 77.3 tonnes from the trust.

Holdings in GLD peaked in December 2012 at 1,353 tonnes or 43.5 million ounces.