Gold funds hit by 12th week of outflows after Bernanke’s QE downer


Investors continued to pull money out of gold exchange-traded products after fears grew that the US could start to gradually withdraw quantitative easing this year.

Figures published by ETF Securities show $93m was taken out of physical gold ETPs last week. This marks the 12th week running that the products have seen outflows, with the total redemptions for this period reaching $1.99bn.

Last week saw Federal Reserve chairman Ben Bernanke confirm that the central bank would consider scaling back the pace of its $85bn-a-month bond-buying programme in the latter half of 2013 if the US economy continues to strengthen.

This led to a global sell-off, with gold being one of the asset classes hit. Gold spot prices suffered a 6.4 per cent fall after Bernanke made his comments.

ETF Securities’ research team says: “The Fed’s announcement of the potential gradual withdrawal of bond purchases later this year has seen a sharp increase in real interest rates and a strengthening of the US dollar, both providing headwinds to gold price performance.”

A recent poll by Bloomberg found that gold traders are at their most bearish since January 2010, with 15 analysts out of 26 surveyed expecting the price of gold to see further falls this week.

ETF Securities adds that copper and platinum ETPs witnessed inflows on last week’s price dips. Investors have added to copper ETPs for three straight weeks, following prices hitting a seven-week low after the Fed announcement.

“Commodity prices dropped together with other cyclical assets as the Federal Reserve’s latest policy announcement prompted panic selling across financial markets,” the research team adds.

“To the degree that the Fed is right and the US economy is on a sustainable recovery path, we expect that once the knee-jerk risky asset sell-off subsides, investors will accelerate their buying of the more cyclical commodities.”