* SPDR Gold holdings post 2nd biggest fall this year; at
* Gold hits near three-year low on Fed stimulus fears
* Metal off 11.5 pct since last week start, down 26.5 pct
By A. Ananthalakshmi
SINGAPORE, June 26 SPDR Gold Trust, the
world's largest exchange-traded gold fund, posted its
second-biggest percentage drop in holdings this year on Tuesday,
and is set to suffer more outflows if a slide in prices of the
metal is sustained.
Holdings in SPDR are closely watched and are key to gold
prices as the fund holds about $40 billion worth of the metal at
Spot gold fell 3.6 percent to a near three-year low
of $1,230.29 an ounce on Wednesday, as upbeat U.S. economic data
supported the Federal Reserve's strategy of scaling back its
Gold, typically seen as a hedge against inflation, has
benefitted significantly from cheap central bank money courtesy
of the Fed's quantitative easing, or QE, policy over the years.
Holdings in SPDR fell 16.23 tonnes, 1.65 percent, to 969.50
tonnes on Tuesday from the day before, to their lowest since
The fall is the biggest this year since a 2.3 percent drop
seen in mid-April, when spot gold prices fell the most in 30
Gold prices have been in a fresh slump since the beginning
of last week, losing 11.5 percent, as Fed Chairman Ben Bernanke
said the U.S. central bank would likely begin to slow the pace
of its $85 billion monthly bond purchases later this year.
"The outflows are very much driven by the positive stream of
economic data and Bernanke clearly outlining the fact that if
the economy continued to recover, QE is going to end," said Mark
Keenan, commodity strategist at Societe Generale in Singapore.
'CASH NEGATIVE POSITIONS'
Gold fell below the key $1,300 mark last Thursday, fueling
an acceleration in ETF outflows.
"With prices falling below $1,300 per ounce, this opens up a
new bracket of potentially cash negative positions, given the
positive number of shares accumulated between $1,200 and
$1,300," Barclays Capital analysts wrote in a note.
About 288 tonnes of gold were accumulated across all
physically-backed gold ETFs within that price range, the
SPDR Gold, in which billionaire hedge fund manager John
Paulson is the biggest shareholder, has seen about 380 tonnes of
outflows this year, valued at over $16 billion at the current
The outflows are the biggest since the fund began operations
in 2004. Bullion, down more than 26 percent for the year, is
headed for its worst annual performance since 1981.
"ETFs have a huge impact on sentiment in the gold market,"
said Keenan. "They have a disproportionate effect because of
Keenan expects about 800 tonnes of outflows across all gold
ETFs this year.
Several brokerages cut their estimates on gold prices
earlier this week citing the Fed's plan to wind down bond
Gold's plunge is drawing a muted response from Asian
consumers and not a repeat of the buying frenzy seen in April as
India's curbs on trade of the precious metal and renewed
concerns about China's growth dent demand.