Citi is not bullish on gold (COMEX:GCG14) at this stage. The early signs of growth in Europe, the pickup in growth in the U.S. and the improvement in global economy suggest that people are becoming more risk seeking. Hence in all probabilities, they may shed their gold holdings, which normally are considered as defensive bet.
According to Citi data, FII flows slowed across Emerging Markets. At this point, FIIs prefer Developed Markets over Emerging Markets. The global firm also believes that flows into India will be slow when compared to relative markets. The investors have pulled out $873 million from EMs including India over the past 10 weeks. From a flow perspective, the beginning of 2014 is going to be quite tough.
The key factor of interest is the dollar. In near short-term, stronger dollar could halve the negative repercussions on flows to emerging markets. The policy decisions with regards to Current Account Deficit (CAD) will determine the magnitude of fund flows in a slighter longer term.
The outflows from commodity funds, especially gold funds, will continue in 2014 as well. Citi’s Markus Rosgen in an interview with CNBC stated that they are less bullish on outlook for gold in 2014.