Gold price: Yellen rally fizzles out as ETF sell-off continues
The gold price on Monday gave up some of last week's hard-won gains, sliding more than $16 to a day low of $1,269.20
In lunch time trade December gold futures were changing hands for $1,372.80, retreating from highs of $1,294 set Thursday last week following Fed chair nominee Janet Yelen's comments on the bank's stimulus program.
Losses in the volatile silver market was steeper with the metal losing 1.7% to $20.37, up from $20.30 earlier in the day. Silver is down 6.6% so far this month.
The precious metals weakness comes as institutional money continue to exit the market in droves.
Gold-backed ETF holdings of the metal dropped 7 tonnes last week to the lowest level since April 2010, while outflows from silver funds totaled 122 tonnes, the second biggest weekly reduction since June according to Saxo Bank.
Institutional investors, especially the leveraged types such as hedge funds have increasingly been growing impatient with gold's prospects resulting in a doubling of the gross-short exposure through futures during the week ending November 12.
Ahead of Yellen's speech which was broadly supportive of the Fed's QE program, pushing out indefinitely any tapering of the $85 billion being pumped into financial markets each month, net longs in gold were cut by 36%.
Large investors are opting to put their clients' money into the US stock market which continues to set new highs. In 2013, the Standard & Poor's index of the 500 largest companies in the US, is up some 30%, while gold has retreated 24% from its opening levels of $1,677.
The extent to which investors have abandoned gold-backed ETFs is most striking when you consider the world’s largest gold ETF, SPDR Gold Shares (NYSE: GLD).
Holdings in the fund established November 2004 are now at their lowest level since February 2009 even though net redemptions have slowed dramatically from the torrid pace of earlier in the year.
As of Friday GLD has experienced year-to-date outflows of 485 tonnes to 865.7 tonnes, down just under 36% from the start of the year.