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Gold ETP Outflows Are Seen by BlackRock at $30.9 Billion

Gold investments through exchange-traded products dropped $30.9 billion this year through July, as subdued expectations for inflation eroded demand for the precious metal as a hedge, BlackRock Inc. said.

Gold outflows totaled $2.6 billion last month, extending withdrawals of $4.3 billion in June, BlackRock said in an e-mailed report today. Net-outflows from commodity ETP investments this year reached $31.6 billion, after withdrawals of $2.2 billion in July.

Inflation rates tracked by the U.S. Commerce Department are running below the Federal Reserve’s 2 percent target. The Fed said last week it would maintain its $85 billion bond-buying program, while warning persistently low inflation could hamper economic expansion. Gold has tumbled 24 percent this year amid speculation the Fed would taper its stimulus program.

“Continued modest inflation readings have lessened gold’s appeal as an inflation hedge,” Dodd Kittsley, head of BlackRock ETP research, said in today’s report. Recent outflows have been “building on an exodus that started in January.”

ETP holdings in gold totaled 1,957.76 metric tons as of yesterday, the lowest since May 2010, according to data compiled by Bloomberg. The precious metal reached a three-week low in London today at $1,273.02 an ounce.

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