Don't panic, but gold ETFs are actually adding holdings

Gold coin sales remain strong, ETF outflows cool off

Is the beaten down gold getting ready for a take off? The cues from coin sales by the U.S. Mint and increased inflows into gold ETFs suggest that gold optimism is growing. The prices of gold held steady, signaling a sense of growing confidence in gold’s outlook for 2014.

The physical demand for gold remains strong in Asian countries. The U.S. Mint sales of gold coins touched multi-month highs in January this year. The total sale of gold American Eagle coins crossed 83,500 so far in January. This as per Mint statistics is the highest since April 2013. The Mint had announced rationing of silver American Eagle coins to build up inventories.

The exodus of investors from gold-backed ETFs has cooled off in early-2014. For the first time, the holdings in the GLD-the world’s largest gold-backed ETF rose 7.49 tonnes to 797.05 tonnes on Friday. Gold futures too witnessed significant momentum.

Although the U.S. dollar is likely to remain a headwind for gold in 2014, consensus analyst estimate by London Bullion Market Association (LMBA) predicts gold prices to average around $1,220 in 2014. The most optimistic prediction for gold prices was pegged at $1,550.

According to Barclays, the modest build in speculative positioning, an increase in ETP holdings, and a strong start to coin sales implies investor appetite may be less of a drag on gold prices in 2014.

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