Investors Pull Most Money Out of SPDR Gold in Eight Months

  • U.S. data increases prospects for Fed rate hike this year
  • Citigroup’s U.S. Economic Surprise Index at 18-month high

Are the Events in Turkey Bullish for Commodities?

An improving economic outlook in the U.S. is sapping demand for exchange-traded funds backed by gold. 

Investors pulled $793 million last week out of SPDR Gold Shares, the most since November, according to data compiled by Bloomberg. Holdings in gold-backed ETFs around the world slipped 3.9 metric tons last week, the most April 22, data show. Bets that the Federal Reserve may raise interest rates by December climbed after reports on Friday showing gains in U.S. retail sales and consumer prices last month.

Bullion has rallied 25 percent this year and posted the best first half of a year in four decades amid speculation that economic-growth concerns would keep the Fed from raising rates any time soon. Investors may be reassessing that outlook, as Citigroup Inc.’s U.S. Economic Surprise Index, which measures whether data beats or misses forecasts, rose to the highest since January 2015. Low rates are a boon to gold, which doesn’t pay interest.

“The economic data released over in the U.S. last week has been promising and it has improved the chances of the Fed increasing the interest rate in the near future,” Naeem Aslam, the chief market analyst at Think Markets U.K. Ltd., said in an e-mail. The fund flow out of SPDR “is mainly due to this reason,” he said.

Gold for immediate delivery slipped 0.6 percent to $1,329.58 an ounce at 1:55 p.m. in New York, Bloomberg generic pricing shows. Gold futures for August delivery added 0.1 percent to settle at $1,329.30 an ounce.

Gold may still gain on geopolitical concerns that can fuel haven demand, Aslam said. While financial markets showed signs of resilience following a failed coup attempt in Turkey, investors remain on edge. Turkish President Recep Tayyip Erdogan’s crackdown prompted doubts about the country’s longstanding place in the North Atlantic Treaty Organization and eligibility for eventual European Union membership.

“We are of the view that it may be a good opportunity” to buy gold, Aslam said. “There are still way too many uncertainties in the market. Unrest in global geopolitics are further adding color to this picture.”

Before it's here, it's on the Bloomberg Terminal.