A drop below the psychologically important $1,300 an ounce level at the end of the month did not deter precious metals investors from pouring money into the sector during July.
Exchange traded funds backed by physical gold saw modest net inflows last week of 4 tonnes to reach a total of 1,743.7 tonnes.
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 29 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.
The week’s small increase of 4.8 tonnes in the holdings of silver-backed ETFs was also the best performance since August 2013.
A recent correction, or just the beginnings of much bigger one, on frothy equity market may be behind the rotation into precious metals.
Gold’s allure as a safe haven asset was also boosted by continuing turmoil in the Middle-East and Eastern Europe.
In contrast to ETF investors, speculators in gold futures and options turned more bearish last week.
Long positions – bets that the price will go up – held by large investors like hedge funds decreased to 148,193 lots in the week to July 29 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, increased by 23% or just under 5,000 to 26,101, which translates on a net basis hedge funds holding 122,092 lots or 12 million ounces.
Ahead of regular trading in New York on Monday, gold’s was trading at $1,295 an ounce, up slightly from Friday’s close and a 8.1% gain for the year.
The 2014 rally in the price of gold has not convinced most bears. Gold will average $1,252 in the fourth quarter according to the median of 33 estimates in a Bloomberg survey of analysts.