Commodities & Metals

Are Lower Gold ETF Outflows Helping to Mark a Bottom in Gold?

Each quarterly report on demand trends from the World Gold Council (WGC) shines a different light on aspects of gold. While the overall report shows lower demand and lower supplies for gold in the second quarter of 2015, there may be some good news on the investing front, as far as exchange traded fund (ETF) investors are concerned. It seems as though the outflows from these ETFs have slowed to a crawl.

Investors and gold bugs alike must know that the WGC is generally going to be positive on gold. The team pointed out that China and India were responsible for half of the weakening gold trends, and they also pointed out that overall prospects for the remainder of the year are more encouraging for gold — with consumers responding to the recent price drop.

That being said, the only real good news we see in the report is that outflows in ETFs seem to be coming to an end. This should be good news for the likes of SPDR Gold Shares (NYSEMKT: GLD) and iShares Gold Trust (NYSEMKT: IAU). Still, from the view of 24/7 Wall St., trying to call an exact bottom in gold or any other major benchmark or commodity, is nearly impossible to do. There are just too many macro forces at work globally, and the driving force changes in markets quickly.

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The WGC showed that the “investment outflows,” where losses were mainly seen was concentrated in the bar and coin segment. Demand for these products fell by 15% year over year. Outflows from gold-backed ETFs were smaller in size than in the second quarter of 2014, with fewer than 23 tons leaving these trusts. Those outflows were shown to have had only a very limited impact on the gold market in the second quarter.