Gold ETF outflows seen finding its way to Asian consumers

NEW DELHI (Scrap Monster) : The gold previously held in Exchange Traded Funds (ETFs) are seen finding its way to Asian consumers. The purchasing behavior is likely to remain robust among Chinese and Indian consumers as long term gold sentiments doesn’t seem to have altered, states the latest World Gold Council (WGC) report.

The gold flow out of ETFs has been tremendous during the first quarter of the year with almost 350 tonnes of the precious metal flowing out of the ETFs. What is more surprising is the fact that almost half of these outflows have occurred since end of March. The SPDR Gold Trust holdings tanked nearly 20% from 1,350.8 tonnes as on year end 2012 to 1078.5 tonnes by this year April end. The total outflow from Gold-backed ETFs during the period was 13%.

The ETF outflows are seen countered by very strong demand in the consumer markets for bars, coins and jewellery. The gold bar premiums are riding at exceptionally high levels in regional markets. The purchases in China, India and the US are particularly strong. The recent survey conducted by the WGC reveals that 82% of the Indian and Chinese consumers believe that the gold prices will remain stable or increase in next five years. Around 70% are optimistic of a price rally in the next 12 months.

Even though a short-term downside to ETF market is not completely ruled out, the outlook for the remainder of 2013 is even more positive. The gold previously held in the ETFs will find its way to Asian consumers. The end-user demand for gold across the globe will provide stability to gold prices, according to WGC.