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Investors cut their holdings in gold exchange-traded products by $2.3bn last month as prices fell to their lowest level in five years.
Long-time gold bull John Paulson, who has a $1bn stake in the largest gold ETF, trimmed his fund’s holdings in the second quarter, a filing released on Friday showed. The withdrawals are a sign of the uncertainty in the gold market ahead of expected rate rises by the Fed this year, which will make assets that provide a yield more attractive.
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Gold hit a five-and-a-half year low last month. While it has edged up this month, it is still down more than 40 per cent from its peak in 2011.
Figures from the World Gold Council industry body show that gold demand fell to its lowest level in six years in the second quarter. Oil exchange traded funds, in contrast, saw inflows of $2.1bn in July, according to BlackRock.
“When prices fall we do see investors heading for the exit and that tends to exacerbate the price fall,” said Jonathan Butler, an analyst at Mitsubishi in London.
“There was some months of net growth, some new buying in January, but from March to May and July we’ve seen sufficient liquidation.”
There was a total of $2.3bn withdrawn from gold ETFs, according to BlackRock.
ETF Securities, which launched the first gold-backed ETF more than a decade ago, puts the total withdrawal even higher at $2.447bn.
“Sentiment has turned significantly negative against gold, especially among exchange-traded product investors,” said Nitesh Shah, an analyst at ETF Securities. “In the past few weeks we’ve seen outflows from gold, even as in the futures markets shorts have been trimmed and longs increased.”
Paulson & Co cut its stake in the SPDR Gold Trust, the world’s largest gold ETF, by 1m shares to 9.2m shares in the quarter ending June 30, according to a filing. The fund’s total position was still worth over $1bn.
However, filings released last week show some other notable funds are buying.
Stanley Druckenmiller, a legendary hedge fund manager who previously worked for George Soros, bought shares of SPDR Gold Trust, an exchange-traded product backed by gold, worth $323.6m at the end of June, according to a quarterly filing with the Securities and Exchange Commission.
Separately, Soros Fund Management, headed by Mr Soros, bought holdings in gold miners, with 1.9m shares in Canadian gold miner Barrick Gold, and kept its stake in the Market Vectors Gold Miners ETF.
