Investors switching out of gold ETFs

Investment in gold ETFs has been muted by the pick up in other asset classes

LONDON (Reuters) - 

Inflows into gold-backed exchange-traded funds dwindled in the third quarter as investors switched their interest to other products, with the holdings of six funds tracked by Reuters rising only 1 percent.

The six -- the SPDR Gold Trust GLD, ETF Securities' ETFS Physical Gold (PHAU.L: Quote) and Gold Bullion Securities (GBSx.L: Quote), and products operated by Julius Baer, Zurich Cantonal Bank and iShares -- saw inflows of just over 697,000 ounces in Q3, against 995,000 ounces in the second quarter.

Both figures are well down on the record inflows seen in the first quarter, when fears over financial market stability sparked a surge of investment into physical gold. Holdings of the six rose nearly 14.5 million ounces that quarter.

VM Group analyst Matthew Turner said that given the huge inflows into ETFs in the first three months of the year, the fact that more redemptions had not been seen was positive.

He said further investment in gold ETFs was limited, however, by a recovery in other assets such as equities, which lost significant value in the first quarter.

"Given that stock markets have picked up after Q1, tiny changes in investor perceptions of the relative performance of gold versus other investments probably meant that there wasn't so much interest in gold," he said.

The largest percentage growth of the six gold ETFs monitored by Reuters was seen in ETF Securities' ETFS Physical Gold, whose holdings rose 31% or 168,115 ounces to 3.69 million ounces.

The largest gold-backed ETF, New York's SPDR Gold Trust, saw an 810,902-ounce or 2% fall in its holdings in the third quarter, however. The main silver ETF, iShares Silver Trust SLV, also saw a small outflow of just over 4 million ounces.

ETF Securities' ETFS Physical Palladium product (PHPD.L: Quote) saw its holdings rise by more than two-thirds to 529,481 ounces from 312,950 ounces at the end of the previous quarter.

The platinum-backed funds operated by Zurich Cantonal Bank and ETF Securities also saw inflows in the quarter of 14% and 12% respectively.

 (Reporting by Jan Harvey; Editing by William Hardy)

© Thomson Reuters 2009 All rights reserved

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