Investors, speculators leaving gold market in droves
On Monday gold futures were hammered again dropping the price of the metal to a 3-month low, hurt by a strong dollar and geopolitical troubles in Iraq and Ukraine fading from headline.
In afternoon trade on the Comex division of the New York Mercantile Exchange gold for December delivery was changing hands for $1,255.60 an ounce, down nearly 1% or $12 an ounce compared to Friday's closing price.
Precious metals investors poured money into the sector during July, but renewed selling in August only accelerated into September.
Global exchange traded funds backed by physical gold saw outflows last week of 13.4 tonnes, dropping total holdings to 1,713 tonnes, perilously close to four-year lows of 1,708 reached in June.
Some 17 tonnes left during August and that compares to inflows in July which was the best since November 2012. Year to date roughly 50 tonnes have left the dozens of funds traded around the globe and investment bank Barclays believes 100 tonnes could exit the market in 2014.
Gold bullion holdings in global ETFs hit a record 2,632 tonnes or 93 million ounces in December 2012, but last year saw net redemptions of 800 tonnes.
Silver is performing much better than the yellow metal with last week's addition of 56.7 tonnes in the holdings of silver-backed ETFs, bringing the total to 19,866 tonnes.
Despite the lacklustre price of silver, ETF investment in the metal is now within shouting distance of October last year's record of 20,121 tonnes.
Like ETF investors, speculators in gold and silver futures and options turned more bearish last week, slashing long positions – bets that prices will go up – dramatically.
Bullish bets on gold – net long positions held by large investors like hedge funds – were cut by 20%, while silver longs more than halved in the week to September 2 according to Commodity Futures Trading Commission data released after the close of business on Friday.
On a net basis hedge funds hold 74,031 gold lots or 7.4 million ounces, nearly half the year high of 144,272, while silver longs have dwindled to 6,264 lots from 46,795 in June.
Open interest – a measure of market involvement – held by large investors or so-called managed money picked up slightly during the week, but remains close to a five year low.