In the first nine months of the year, physical gold ETFs saw almost 700 tonnes in redemptions.

But, according to Marcus Grubb, MD Investments at the World Gold Council, recently “We have almost seen a cessation of outflows and, in fact, we had some net inflows globally in the last two to three weeks into November.”

Speaking to Mineweb on the release of the Council’s Gold Demand Trends for Q3 2013 report, Grubb said, “It was striking to me that despite considerably stronger-than-expected economic numbers on Friday last week – Non farm payroll and GDP – we have not seen significant ETF redemptions since then, a couple of tonnes at the most… what that means is a lot of the commodity super cycle investors have exited gold and also those investors were fearful of a collapse of the banking and financial system.”

The implication of this, Grubb says, is that those investors now holding ETFs “are strategically committed to gold and have it as a unique hedge asset and a diversifier in their portfolio.”

While outflows may have stopped, the bigger question for Grubb is: what are the catlysts that could drive gold higher again and trigger new inflows into the products?

One scenario that could play out, he says, is based on the fact that evidence is beginning to emerge of investors returning little-by-little to the gold sector as a result of the significant price drops seen over the course of the year. And, he says, with tapering largely discounted in the gold price, going into 2014, “you could see quite a significant change in behaviour in markets generally”.

“We are probably entering a low inflation, weak economic recovery but, one that is now clearly sustainable – albeit one in which, central banks maintain extremely easy monetary policy. That is a scenario where gold could actually move back to being viewed as more of a risk-on type asset; as a hedge against gradually rising inflation and stronger economic growth,” he told Mineweb.

Grubb believes that this could mean that gold will start strengthening again alongside equities, rather than being negatively correlated with them.

“Investors could start to add gold again as a hedge asset to higher risk weightings on the equity side on their portfolio and ultimately leave bonds because it would be clear we would be in a recovery that was going to generate gradually higher interest rates but, not so high that it would adversely affect gold markets.

Speaking on Mineweb‘s Gold Weekly podcast, Nicholas Brooks, head of research at ETF Securities agrees that tactical views are likely to dominate the gold market in 2014, but believes that things are pretty well balanced.

“Some of the analysts who have negative views on gold are basing those views on the idea that the US economy is going to see a straight line recovery through next year, that interest rates are going to rise – in some cases quite considerably – and continued dollar strength, and that’s why they’re forecasting weaker gold price. But the flipside is also true…

To the extent that there is some disappointment next year and the US economy doesn’t continue to power ahead, as most analysts are forecasting, and that in fact there is some reduction in interest rate expectations, then the gold price may surprise on the upside, particularly given the negative positioning.”