Gold ETFs hit by renewed tapering fears

Money drained out of gold exchange traded products last week as better US economic news sparked renewed tapering speculation.

ETF Securities’ gold products posted their largest weekly fall since June, losing £222m, despite rising demand for the metal in China and the US.

US economic indicators, such as the unexpectedly-strong jobs and manufacturing figures, point to a sustained recovery and QE tapering early next year, ETF Securities’ weekly report says.

“While Fed tapering is likely to provide support for the US dollar in the near term – historically a headwind for commodity performance – we believe that commodity prices will look through this in 2014 given that US dollar gains are the result of a strengthening economy which ultimately will be positive for commodity demand and prices,” it explains.

The “already extremely negative sentiment” for gold and the improving outlook for physical demand limit the potential for further price falls.

Energy ETPs was the only sector with a net inflow, of $6m, during the week.

But natural gas ETPs shrank $12.7m over the week to a total of $334.8m as investors took profits.

The Energy Information Association expects an unusually cold winter will boost residents’ and businesses’ gas demands.

ETF Securities says some investors appeared to be making the most of a wider energy play with longer dated energy ETP inflows hitting $19m.