Could the Central Bank Actions Change the Gold-Backed ETP Outflows?
The U.S. Comex gold futures fell $122.70 and 7.69 percent in April,
representing the largest sell-off in gold since December 2011 when the
gold futures fell over $200 intra-month. The gold futures dropped 12.16
percent year-to-date after a bull-run for twelve consecutive years as
the prices surged from $279 at the end of 2001 to $1,675.80 at the end
of 2012. Year-to-date, the Dollar Index rose 2.48 percent, the S&P
500 index surged 12.02 percent, the Euro Stoxx 50 index rose 2.89
percent while the CRB Commodity index dropped 2.33 percent.
Mixed Global Economic Data
Global economic news has been mixed at best. In the U.S., the April
consumer confidence index jumped unexpectedly to 68.1 while the
S&P/Case-Shiller housing index rose 9.3 percent year-on-year in
February. Despite the housing improvement, the manufacturing remains an
area of concern as seen in the recent lower-than-expected April Chicago
purchasing manager index. In April, China’s manufacturing PMI expanded
at 50.6 compared to 50.9 in March, indicating that the expansion is
slowing down. While the April jobless rate in Germany was unchanged at
5.4 percent, the Euro-area unemployment rate inched up to 12.1 percent
and the youth unemployment rate reached 24 percent. The 11 percent
rebound in the gold futures from the 15 April’s trough probably reflects
the expectations that the U.S. Fed will maintain its bond purchase
program while the ECB will cut rates further given the worsening
economic data.
Continued ETP Outflows
Gold investors are keenly watching the direction of the gold-backed ETP
holdings, which fell 174 metric tons or 7.1 percent in April to 2,275.84
metric tons according to Bloomberg. The SPDR gold holdings fell to a
43-month low to 1,078.54 tons at the end of April. Deutsche Bank
estimated that institutions, which hold close to 50 percent of SPDR, may
further sell down 5 million ounces of gold in Q2. The commodity funds
also saw a large net outflow of $7 billion in Q1 according to Barclays.
While such outflow may seem to reflect global economic weakness, gold
was the single asset dragging down the aggregate with $9.2 billion of
net gold funds outflow in Q1. This Wednesday’s FOMC meeting and this
Thursday’s ECB announcements will give further clues to gold investors
which way they should go.
This story is provided by Sharps Pixley, for more information and content please visit: www.SharpsPixley.com
01 May 2013 | Categories: Gold