Not just the smart money getting into gold
Despite gold drifting down for more than a week and dropping through the psychologically important $1,300 an ounce level today and silver losing touch with $20 an ounce, precious metals investors continued to add to their holdings.
Total holdings in exchange traded products backed by physical gold and silver rose last week, albeit modestly, with two tonnes of gold bringing total holdings to 1,728.7 tonnes. More than 19 tonnes of silver trickled back into ETFs for a total of 19,616 tonnes.
Retail investor sentiment in precious metals were buoyed on Friday when second quarter filings by hedge fund gurus John Paulson and George Soros indicated continuing belief in good prospects for the sector.
Paulson & Co kept steady its $1.3 billion stake in the SPDR Gold Trust (NYSEARCA:GLD) while Soros Fund Management LLC almost doubled its ownership of gold mining stocks with a $89 million investment including call options in ETF Market Vectors Gold Miners. Soros bought 1 million shares of Allied Nevada Gold Corp (TSE:ANV), but slashed investments in top gold producer Barrick Gold (TSE:ABX).
July recorded the highest inflows for the dozens of gold-backed funds traded around the world since November 2012 and the first monthly net addition since March.
Year to date the picture is still negative with around 30 tonnes leaving gold ETFs and investment bank Barclays predicts net redemptions could total 100 tonnes 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.
Like ETF investors, speculators in gold futures and options turned more bullish last week.
Long positions – bets that the price will go up – held by large investors like hedge funds increased 28% to 154,516 lots in the week to Aug 12 according to Commodity Futures Trading Commission data released after the close of business on Friday.
At the same time short positions, indicating weaker prices ahead, decreased sharply 20,808 which translates on a net basis hedge funds holding 133,700 lots or 13.3 million ounces. That compares to year high of 144,272.
Net long position in silver hit a record mid-July, but has halved since then sitting 23,506 contracts. Large investors were still net short silver in June.
Ahead of regular trading in New York on Monday, gold futures were trading at $1,302 an ounce while silver eked out gains to exchange hands at $19.56 an ounce.
Image of open outcry commodities trading at the Chicago Board of Trade in 1988 by Greg Wass