In­vestors 'flee' gold as spec­u­la­tors pre­dict more down­turn

The Pak Banker - - BUSINESS -

DUBAI: In­vestor sen­ti­ment sur­round­ing gold is de­te­ri­o­rat­ing, as spec­u­la­tion is rife that the pre­cious me­tal is head­ing for an oil-style col­lapse, ac­cord­ing to an­a­lysts.

The latest of­fi­cial data in­di­cated that in­vestors are al­ready flee­ing the pre­cious me­tal, with bar and coin de­mand fall­ing and ex­change-traded funds (ETF) out­flows slow­ing down. At the same time, hedge funds are bet­ting more on the pos­si­bil­ity that the prices will fall rather than rise. Ac­cord­ing to Ole Hansen, head of com­mod­ity strat­egy at online mul­ti­as­set trad­ing and in­vest­ment spe­cial­ist Saxo Bank, the sen­ti­ment in gold and other me­tal mar­kets has been "turn­ing in­creas­ingly neg­a­tive" dur­ing the past month.

He pointed to the lack of in­fla­tion­ary signs and safe­haven de­mand, com­bined with ris­ing bond yields, col­laps­ing emerg­ing mar­ket cur­ren­cies, a ris­ing dol­lar, and ris­ing ex­pec­ta­tions of an early US rate hike, as the rea­sons that have helped trig­ger an ex­o­dus out of gold.

"Nowhere is this clearer than in the fu­tures mar­ket, where hedge funds dur­ing the past few months have been get­ting in­creas­ingly bear­ish. As a re­sult, we have seen the com­bined net po­si­tion of gold fu­tures and op­tions turn neg­a­tive for the first time since data be­gan be­ing col­lected in 2006," Hansen said. In July alone, hold­ings in ETF backed by phys­i­cal gold dropped by 63.6 tonnes. "A monthly re­duc­tion of this mag­ni­tude was last recorded dur­ing [the sec­ond quar­ter of 2013] when the latest ma­jor price col­lapse oc­curred," Hansen added.

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