Gold trading flows indicate that individual investors and small family offices and funds are staying put while larger institutional investors head for the exit
Retail investors’ love for gold, shown in their holdings in iShares Gold Trust, hasn’t wavered, even as Federal Reserve officials reiterated their outlook for monetary tightening, helping send the metal below its 100-day moving average. Assets in the second-largest exchange-traded fund backed by the metal held at a seven-month high while its pricier, bigger rival saw investors pull back.
The loyalty displayed by iShares holders illustrate the growing skepticism among investors on the Fed’s ability to meet its projections for more interest-rate increases through 2018 amid recent disappointing U.S. economic data. The yield on the 10-year Treasury has fallen to 2.1529 percent Wednesday from about 2.22 in December 2015, before the Fed raised rates for the first time in nine years. Borrowing costs have risen three times since then.
“Retail investors typically are longer-term buy-and-hold type of investors,” Chris Gaffney, the St. Louis-based president of EverBank World Markets, said in a telephone interview. “Institutional investors are more likely to buy and sell and take advantage of the short-term outlook, and some of them are just taking some profit off the table.”
Gold futures for August delivery rose 0.2 percent to settle at $1,245.80 an ounce at 1:40 p.m. on the Comex in New York, after slipping to $1,241.70, the lowest for a most-active contract since May 17. Prices have fallen 2.4 percent since June 14, when the Fed raised borrowing costs for a second time this year, curbing the appeal of non-interest bearing gold.
Holdings in iShares Gold, which has an expense ratio of 25 basis points, have remained unchanged at 6.66 million ounces since June 13, when investors added 14,427 ounces. Its biggest holder is Charles Schwab Corp., according to data compiled by Bloomberg. SPDR Gold Shares, the largest bullion-backed ETF, which has an expense ratio of 40 basis points, has seen its assets shrink since June 13, as investors pulled $545 million from the ETF, the biggest weekly outflow since March.
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