Australia Markets closed

Gold Falls Again as Funds Flow out of U.S. ETFs

By Geoffrey Smith -- Gold prices fell for the fourth time in five days on Tuesday, with market participants finding better relative value in government bonds against an improving macroeconomic backdrop.

By 11:18 AM ET (1618 GMT), gold futures for delivery on the Comex exchange were down 0.5% at $1,543.45 a troy ounce, their lowest in a week. Spot gold was down 0.3% at $1,542.99 an ounce.

By contrast, U.S. Treasury bond prices were bid up, bringing yields down by two to three basis points along the yield curve after U.S. consumer prices rose by less than expected in December.

Yelena Maleyev, an economist with Grant Thornton, noted that even though the annual CPI print rose to its highest in 18 months, at 2.3%, that was due largely to volatile energy costs. The core CPI rose only 0.1% on the month, creating little incentive for the Federal Reserve to alter its view on price trends.

European government bond yields also fell modestly, with the U.K. 10-year yield falling to its lowest in over a month at 0.71% on strengthening expectations of a rate cut at the end of the month from the Bank of England.

However, gold appears to be suffering from a reversal of the panicked portfolio flows into ETFs that followed the assassination of Iranian general Qassem Soleimani earlier in January. ETF data compiled by the World Gold Council showed U.S. gold ETFs have lost 0.9% of their assets under management so far this year, while European ETFs – supported by the lower interest-rate environment in Europe – have added 0.3%. Curiously, Italian gold ETFs stand out from the European trend, having shed 4.5% of their AUM since Jan. 1.

Elsewhere in the metals space Tuesday, silver futures fell 1.0% to a three-week low of $17.82 an ounce. Platinum futures rose 0.4% to $986.40.

Copper, meanwhile, ground higher to $2.87 a pound, another eight-month high, as market participants increased their bets that the signing of the U.S.-China phase one trade deal on Wednesday will pave the way for more solid demand from China for the year ahead.

Related Articles

Factbox: Iran's metals under new U.S. sanctions

Crude Oil Prices Climb; Chinese Trade Data Help

Phase 1 commodity targets likely more than China can chew: analysts