* SPDR Gold Trust holdings up 10.5 T in February
* Last net increase in reserves was in Dec. 2012
* Weak U.S. data, softer dollar lift gold prices
By Jan Harvey
LONDON, Feb 27 The world's largest gold-backed
exchange-traded fund, New York's SPDR Gold Shares, is on
track for its first monthly inflow of metal in more than a year
after a run of weaker U.S. data boosted investment interest in
The SPDR fund, which issues securities backed by physical
metal and attracted big inflows in the wake of the financial
crisis, has added 10.5 tonnes to its reserves so far this month.
That means that, barring a large outflow on Friday, February
would be the first month to show an increase since December
Last year holdings of gold-backed ETFs fell by 881 tonnes,
according to data from the World Gold Council and Thomson
Reuters GMFS, as gold prices tumbled 28 percent. The SPDR
alone saw its holdings drop by more than 550 tonnes.
Investors dumped gold in anticipation of a U.S. Federal
Reserve tapering of its bullion-friendly monetary easing
programme, which had fuelled investment in the metal by keeping
interest rates low, while stoking inflation fears.
A run of below-par economic data has since dampened talk
that tapering, announced in December, may accelerate this year.
"Some negatives are still there for the gold price, but
they've been heavily obscured by positives since the start of
the year," Natixis analyst Nic Brown said. "You've had bad
weather, which has led to substantially weaker U.S. economic
data. That has gone hand-in-hand with lower U.S. interest rates,
and a weak dollar."
"You can clearly see how those two key factors have resulted
in investors changing sentiment, and the huge outflows we saw
from physically backed exchange-traded products last year have
not just dried up, but have started ever so slowly heading in
the other direction," he said.
GLOBAL HOLDINGS RISE
The rise in the SPDR's holdings has helped overall gold ETF
holdings increase by 7.3 tonnes this month, Reuters data showed
, with some smaller funds still seeing outflows.
Interest in the products has been piqued by a recovery in
gold prices since the start of the year. Spot gold is up just
over 10 percent so far in 2014 and 7 percent in February, its
best monthly price performance since July 2013.
"This year we have price strength, we have a lot more people
willing to espouse bullish views, and we've had a bit of a shock
to the system with the emerging market currency issues
reinforcing in some people's minds that they may need some kind
of insurance," Mitsui Precious Metals analyst David Jollie said.
"That means there is definitely more buying interest in gold
ETFs. On the selling side, a lot of people have already rotated
out of the funds, so there's less incentive to do so now," he
added. "So the net impact is that compared to last year there
has been a big swing in ETF flows from bearish to bullish."