Futures & Commodities

Gold appetite at 4½-year low in June

Investor sentiment for the precious metal gold fell to a 4½-year low last month after a moderate price rally in mid-June, according to new research by London-based online exchange BullionVault.

Gold added $76 to its price during the month of June, a rise of 6 percent, with dovish central banks and concerns over Ukraine and the Middle East giving it support. That jump subsequently deterred new buyers and spurred investors holding the metal to sell. The precious metal is traditionally seen as a "safe-haven" during geopolitical crises and its lack of yield means it also performs well in low rate environments.

Gold was still trading near three-month highs on Wednesday. Traders told Reuters physical demand from Asia – the biggest bullion buying region – has been weak due to the rise in prices. Inflows into the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, have supported prices however. The sheer size of the fund means it has a significant impact on prices.

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BullionVault - a company that holds $1.4 billion worth of gold bullion for more than 52,000 people that have used its service - said on Tuesday that its monthly buying index had hit its lowest level since February 2010.

Beginning in October 2009, the gold investor index shows the balance of net buyers over net sellers and usually averages at 55.4, peaking at 71.7 in September 2011. June's figure came in at 51.2, down sharply from May's reading of 52.4.

"Sentiment towards gold amongst the investing public has scarcely been lower since the metal began making headlines during the financial crisis. Last month's price jump through $1,300 per ounce deterred new buyers and also saw a sharp rise in the number of sellers," Adrian Ash, the company's head of research said in Tuesday's press release.

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Ash added that while the ratio of buyers to sellers had fallen, overall client holdings rose by weight due to larger investors choosing to grow their holdings. In some cases, he had seen several larger users, who'd previously sold out, coming back to start rebuilding their positions.

Gold surged around 400 percent between 2002 and 2012, helped by low interest rates, extra liquidity from the U.S. Federal Reserve and concerns over the global economy, which drove investors towards perceived safe-haven assets like bullion.

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But in late 2012 and 2013, with the Fed looking to take its foot off the gas in terms of its $85 billion per month asset purchases, the precious metal lost its luster and slipped nearly 30 percent last year. Many analysts predicted gold could continue its move lower this year but it has been surprisingly resilient. Year-to-date spot gold has moved 10 percent higher and held close to a three-month peak on Wednesday at $1,325 per ounce.

Meanwhile SPDR Gold Trust, continues to indicate that its total holdings have risen with increased investor inflows. Its historical data shows that total holdings rose 5.69 tons to 796.39 tons on Tuesday, its highest level since mid-April.