Gold ETP assets plummet in 2013

The value of gold ETPs halved in 2013, dropping $71bn (£43.25bn) to $76bn, as investors sold out of the declining metal, ETF Securities data shows.

The massive drop drove global commodity ETP asset levels to $128bn, an annual fall of almost 40 per cent.

Over that time the price of gold fell almost 30 per cent.

Gold ETPs are now back at 2010 levels. Most of 2013’s outflows and largest price falls were in Q2 with asset levels leveling out in the second half of the year.

Non-gold ETP investor outflows accounted for just 1 per cent of the decrease in overall commodity ETPs.

ETF Securities head of research Nicholas Brooks says that shows investors still hold a balanced view of commodities overall, despite gold’s flagging performance.

“The main reason for the large decline in global commodity ETP assets in 2013 was a sharp fall in the gold price and investor holdings of gold ETPs,” he says.

“Outflows from commodity ETPs other than gold were in fact quite modest, with commodities more heavily used in industry such as platinum and silver seeing strong inflows,” he adds.

Silver and platinum had the strongest inflows of the year supported by the global industrial recovery, respectively gaining $841m and $1.3bn of investor money.

Sharp falls in corn, coffee and wheat prices saw investor inflows, but overall agriculture ETFs saw net outflows of $42m.

A seven-year low for arabica coffee prices attracted a record $232m of inflows as investors anticipate an upward correction. Meanwhile, broadly diversified agriculture ETFs had $203m in investor outflows. 

Brooks believes commodities’ fortunes in the coming year will be dependent on the macroeconomic environment, with a continuing recovery likely to boost all commodities bar gold.

“Strong demand growth together with the risk of supply disappointments should be broadly priced supportive and investor flow-supportive in 2014 in our view,” he explains.

“Gold is the wild card. The gold price and investor positioning today reflects near unanimous negative sentiment on gold’s prospects, based on expected higher global interest rates and a strong US dollar as the US economy recovers,” he says.

That makes gold one of the better hedges against underperformance of the US economy, he adds.