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Gold-Backed ETFs saw second largest outflows in history in November - WGC

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(Kitco News) - Shifting investor sentiment in the marketplace as vaccine news created some hope for the global economy caused investors to flee from gold and jump into riskier assets last month, according to analysts at the World Gold Council (WGC).

Wednesday, in its latest market report, the said that global gold-backed exchange-traded markets saw their first month of outflows in roughly 12 months; meanwhile, the pace of those outflows was the second largest in the market's history.

The report said that the gold ETF market saw global holdings drop by 107 tonnes last month, with the value of assets under management falling by $6.8bn or 2.9%. The exodus from gold-backed ETFs came as the price of gold saw its worst monthly performance in four years.

"Two major market risks – the U.S. election and the pandemic - appear to have subsided given a relatively smooth and bi-partisan outcome of the U.S. election and the announcement of successful COVID vaccines," the analysts said. This drove risky assets like stocks to all-time highs in some countries, and the MSCI World Stock index had its best monthly performance ever, highlighting the global impact of both developments. As these two risks subsided, investors reduced hedges, and this was reflected in the gold ETF outflows, higher bond yields, and stock market put/call ratios at extremely bullish levels."

However, despite gold's lackluster performance in November, analysts at the WGC noted that the gold market has still had a stellar year driven by unprecedented investor demand. Despite November's decline, gold holdings in the ETF market are up nearly 50% compared to 2019 flows. For the year, as of November,  916 tonnes of gold has flowed into ETFs.

"Total global holdings are now at 3,793t or US$215bn," the report said.

In a Webinar presentation, Adam Perlaky, Manager, Investment Research, at World Gold Council, said that given the improving investor sentiment, the short-term move in gold last month was not surprising. He also added that there could also be a seasonal element to gold's lackluster performance as November is historically the worst month for the precious metal.

Looking at regional investment trends for November, the WGC said that North American funds had outflows of 62.3 tonnes. Meanwhile, holdings in European funds decreased by 42.6tonnes.

Although the gold prices has recovered since last month's four-month lows, analysts at WGC said there are risks that December could see lower prices and more ETF selling. The analysts noted that the put/call skew in the market increased to a one-year high as

"This suggests that while investors may not anticipate large absolute moves in the gold price, they are positioning much more for downside exposure than for upside exposure," the analysts said.

The comments come as gold prices have managed to push back to a critical resistance area. February gold futures last traded at $1,843 an ounce, down 1.7% on the day.

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