Record outflows from gold ETFs as price plumbs 3-week low

Image: Generation Grundeinkommen

Gold continued to slide today, falling to a three-week low on a stronger U.S. dollar as U.S. stocks gained, with Apple shares hitting a record high.

At the end of trading in New York, the spot price settled at $1256.10 an ounce, $11.50 less than Friday’s close of $1267.70. At one point in the day the price of bullion dipped to $1253.66, which is the lowest it’s been since April 11.

“You’ll find with GLD, people tend not to use it as an inflation hedge, but a crisis hedge”: Bloomberg analyst Eric Balchunas

“Risk appetite isn’t collapsing here,” Bart Melek, head of commodity strategy for TD Securities in Toronto, told Reuters, adding: “Gold has been a little bit overdone here. It looks like we’re just trying to trend to the 200-day moving average.”

Gold futures meanwhile were down 1% at $1255.50.

It’s been a rough set of trading sessions for the yellow metal, with gold ending last week at $1,268, a full $21 lower than the previous week – partially pressured by a stronger U.S. dollar and a tax plan by Donald Trump that included a 15% corporate tax reduction.

But the most telling sign of a gold retrenchment is the activity in ETFs.

The VanEck Vectors Gold Miners (GDX), the biggest ETF that invests in gold-mining companies, saw investors pull $778 million from the $10.3 billion fund last week. The SPDR Gold Shares ETF (GLD) also witnessed the most outflows among commodity funds in the period ending April 28, according to Bloomberg, with fund holders yanking $217 million from GLD, the world’s largest commodity ETF valued at $34.8 billion.

According to an ETF analyst at Bloomberg Intelligence, the record outflows coincided with the first round of the French election, whereby centrist Emmanuel Macron and right-wing candidate Marine Le Pen garnered the most votes. Macron, favoured to defeat LePen in the second round of voting, is considered far less likely to take France out of the European monetary union than LePen.

“You’ll find with GLD, people tend not to use it as an inflation hedge, but a crisis hedge,” analyst Eric Balchunas was quoted saying. “When you have a potential event, especially geopolitical, brewing, you’ll see it take in cash, so it’s only logical that you’d see people exit last week.”

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