Gold price: ETF investors, speculators continue to exit

The gold price was battered on Friday by a quadruple shot – the end of US economic stimulus, a record-setting surge in equities, further falls in the crude oil price and a rampant dollar – falling to levels last seen July 2010.

The gold market was all over the place in October. The metal made a sharp recovery from the 2014 sub-$1,200 low early on to hit a high of $1,255 an ounce by October 21, only to plummet 5% over the last two days of the month.

Large investors and retail buyers sold into gold’s rally mid-October and the latest weekly data show investors continued to reduce their exposure amid the sell-off in gold.

Holdings of exchange traded funds backed by physical gold fell to the lowest in over five years after net sales of 5 tonnes took total holdings to below 1,650 tonnes. Considering the dramatic trading, the outflows were not particularly heavy, however.

Across precious metals funds more than $1.3 billion worth was pulled from vaults, the biggest monthly decline this year according to Bloomberg.

Holdings by funds backed by physical gold haven’t been this depressed since September 2009 when gold was trading below $1,000. Gold bullion holdings hit a record 2,632 tonnes or 93 million ounces in December 2012.

Speculators in futures and options also turned bearish ahead of the rout in gold on Thursday and Friday last week.

Bullish bets on gold – net long positions held by large investors like hedge funds – fell by 5 million ounces in the week to October 28 according to Commodity Futures Trading Commission data.

After cutting both long and short positions, on a net basis hedge funds held 70,298 gold lots or 7 million ounces, less than half the year high of 14.4 million ounces.