Gold holdings in Exchange Traded Pr

Gold holdings in Exchange Traded Products continue to stabilise following a second week with a small net rise of 1.5 tons (source: Bloomberg). While investors can take comfort from the fact that most of the institutional selling which hit the market hard during the second quarter is now over, the relatively subdued response to the ongoing rally is a concern.

ETP Holdings

Since the price of gold bottemed out at 1,180 US dollars per ounce on June 28 the price has moved 19 percent higher. The response from ETP investors during this time was primarily to use the higher price to reduce holdings further by some 97 tons. Physical demand remains robust but for gold to prosper further it needs to see institutional and speculative buying pick up both in ETPs and futures. Last week hedge funds did just that in futures with the net-long position rising by 29 percent to the highest level since February on a combination of new longs and additional short covering.

Technically, gold is getting close to a significant levels with 1,416 representing the 38.2 percent retracement of the October to June sell-off while a move above 1,417 would see gold return to a technical bull market having rallied 20 percent from the June low.