Gold Holdings Decline Isn't Signaling `Big Exit': Chart of the Day

Three weeks of declining gold holdings in exchange-traded funds doesn’t signal a “big exit,” according to UBS AG.

The CHART OF THE DAY shows how gold held through 10 ETFs tracked by Bloomberg fell to 2,040.8 metric tons on Aug. 6, 1.8 percent less than the peak on July 19. Gold declined 5 percent from a record $1,265.30 an ounce set June 21. When gold fell 15 percent from December to February, holdings slid 1.7 percent.

“We don’t expect a big exit out of ETF positioning,” said Edel Tully, an analyst at UBS in London. “ETF investors have displayed a long-term approach to gold and while redemptions have occurred recently, the ETF platform is just marginally down from the all-time high. We expect a buy-and-hold attitude will prevail.”

Gold holdings surged 25 percent the past year on demand for an alternative to currencies and a protection of wealth. That helped investment demand last year to exceed jewelry consumption for the first time in three decades, according to researcher GFMS Ltd. Assets almost equal the combined bullion reserves of Switzerland and China, World Gold Council data show.

Gold traded at $1,201.70 an ounce yesterday at 4:50 p.m. in London, valuing the assets, which represent almost half of last year’s total bullion demand, at $78.85 billion.

(To save a copy of the chart, click here.)

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net.

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