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Outlook on Gold in 2017 Negative, Gold ETP Holdings Drop 4% in December

Jan 12, 2017

Total holdings in physically-backed gold exchange-traded products (ETPs) stood at 2,142.4t (68.9 moz) at the end of December, down 96.9 t or 4% drop from November, the World Gold Council has reported. In value terms, total holdings stood at US$78.9bn, 7% lower than the earlier month, WGC said, adding that it remains negative on gold for 2017.

Giving details, the WGC report noted that the bulk of the decline was seen in North America and Europe, where respective holdings on December 31 were 1,181.4t and 849.1t, down 6% and 3% month-on-month. Gold holdings in Asia dropped 2.3t during the month to end December at 68.1t.

In its just released Insight report, ABN AMRO too has said it expects the outlook for gold prices for the first half of the year to remain negative. Investor demand remains the most crucial driver pushing gold prices lower and any further rise in US nominal and real yields is likely to continue to weigh on gold prices.

Stating that it expected three Fed rate hikes of 25bp each during 2017, the bank’s analysts said that at some point in the year, this would will be fully reflected in the gold price and inflation expectations may start to rise more quickly pushing US real yields lower.  It added that it expected some recovery in industrial and jewellery demand for gold at this stage, noting that despite a negative outlook for gold prices in the first half of 2017, it expected prices to stabilise during the remainder of the year. Events in 2017 will likely form a basis for gold prices to rise in 2018, the analysts said.

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