Gold dropped to a near six-month low on Monday as the post-elections slump continues and financial markets try to make sense of what a Donald Trump presidency may mean for interest rates, economic growth and inflation.
Gold for delivery in December dropped to a session low of $1,212.00 an ounce, the lowest since the beginning of June in already heavy early morning trading on the Comex market in New York. Gold is now down more than $120 an ounce after an initial surge on Tuesday as results showed a likely Trump victory.
Gold bears are making big bets that Trump’s plans for fiscal stimulus, including a $500 billion infrastructure spending program, will lead to strong US economic expansion, higher interest rates and a number of prominent hedge fund managers and billionaires running family offices have moved aggressively out of gold and into stocks.
Gold bulls point to likely inflation arising from deficit spending by a Trump administration, burnishing gold status as a hedge against inflation and geopolitical uncertainty boosting gold’s allure as safe haven asset.
At the moment the bears seem to have the best of it. Since the election investors in top physical gold-backed exchange traded fund – SPDR Gold Shares (NYSEARCA: GLD) – have dumped a net 15.1 tonnes (buying on Wednesday, but offloading more than 20 tonnes on Thursday and Friday.
GLD vaults now hold 934.6 tonnes or just over 30 million ounces; worth $37.1 billion on Friday.
GLD’s holdings hit a 2016 high early July, but nearly 50 tonnes have been pulled from the fund since then, reducing the value of holdings by $5.5 billion as the gold price retreats. Year to date, holdings are up still up 290 tonnes.
GLD dwarfs other physically-backed gold ETFs holding more than 45% of the global total and after a few dismal years, GLD rise in assets under management in 2016 surpassed the banner years of 2009 and 2010 when investors caught in the global financial crisis and spooked by quantitative easing piled into GLD.
On August 22, 2011 when gold was hitting record highs above $1,900 an ounce GLD became the largest ETF in the world briefly surpassing the venerable SPDR S&P 500 trust at a net asset value of $77.5 billion.
Gold holdings in the trust would peak more than a year later in December 2012 at 1,353 tonnes or 43.5 million ounces. Global ETFs hit a record 2,632 tonnes or 93 million ounces of gold at the time.