Gold price: Physical-backed ETFs become one-way bet

After a nice bump at the end of last week on the back of a so-so US jobs report and some short-covering on futures markets, gold is drifting lower again in anticipation of a Federal Reserve rate hike announcement next week.

On Wednesday on the Comex division of the New York Mercantile Exchange, gold futures for February delivery – the most active contract – were last trading at $1,072 an ounce, down from Friday's close of $1,084.

Sentiment among gold buyers remains weak with investors in exchange traded funds backed by physical gold offloading metal consistently for nearly two months.

Holdings in SPDR Gold Shares (NYSEARCA: GLD) – which accounts for more than 40% of the total ETFs traded – have fallen by 62.7 tonnes since mid-October when inflows sent total holdings briefly back above 700 tonnes.

Total holdings have now fallen to 634.6 tonnes or 20.4 million ounces worth $22 billion. Once the largest ETF in the world, in June this year GLD dropped out of the top ten with assets under management more than $50 billion below its 2011 peak.

Holdings have fallen to the the lowest since 19 September 2008. The collapse of Wall Street investment bank Lehman Brothers sparked the global financial crisis occurred September 15 that year.

Total assets in the dozens of gold-backed ETFs listed around the world dropped to 1,465.2 tonnes on Monday according to Bloomberg data. Global ETF vaults held a record 2,632 tonnes or 93 million ounces of gold in December 2012.

The futures market has also been hit be negative sentiment with the latest Commitment of Traders data showing hedge funds building up record-breaking short positions – bets that prices will fall.