Gold Investors Return to Funds as Price Declines for Second Day

Gold Prices Are Still Solid
  • Holdings in gold-backed funds climb for 10th straight session
  • `The narrative for this trade remains good,' BMO's Wong says

Gold investors are piling back into exchange-traded products.

While prices are hovering near the lowest in more than a week, holdings in bullion-backed funds rose 50 metric tons since April 25. That’s the biggest 10-day increase and longest run in two months.

Bullion is up 19 percent this year as a slowdown in global growth and the Federal Reserve’s hesitancy to raise interest rates in the U.S. boosted the metals appeal as an alternative. The World Bank downgraded its global growth forecast this year to 2.5 percent from 2.9 percent, while traders put odds that the Fed will raise rates this year at less than 50 percent, down from about 90 percent in January.

“For the ETFs, the narrative for this trade remains good: the Fed remains sidelined, global growth and inflation remain subdued,” Tai Wong, director of commodity-products trading at BMO Capital Markets, said in a telephone interview. That’s helped “a trade that’s been out of favor for years become fashionable again.”

ETP holdings expanded 4.13 tons to 1,803.7 tons as of Monday, data compiled by Bloomberg show. Assets are up 23 percent this year to the highest since December 2013. Gold futures for June delivery dropped 0.1 percent to settle at $1,264.80 an ounce at 1:40 p.m. on the Comex in New York, capping a second straight day of losses.

In other metals:

  • Silver futures for July delivery gained less than 0.1 percent to $17.092 an ounce.
  • On the New York Mercantile Exchange, platinum and palladium advanced.
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