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GLD and IAU ETF Outflows See Gold Price Hit New 7-Month Lows on US Jobs Data

The PRICE of BULLION fell to new 7-month lows in Dollar and Euro terms Friday as the strongest US jobs data in 8 months crushed bond prices once again, driving up interest rates and inviting further outflows of investment cash from the world's largest gold-backed ETF trust funds, the GLD and IAU.
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Contrary to Wednesday's estimate from ADP Payrolls – which said September saw the weakest US jobs hiring since January 2021 – today's Bureau of Labor Statistics' release said the world's largest economy added 336,000 workers last month, the most since January and almost twice the consensus forecast from economists and analysts.
"The world awaits a US recession that is always coming, but just never arriving," said a note earlier this week from the trading desk at Swiss bullion refiners and finance group MKS Pamp.
"Gold and bond bulls alike seem to be running out of patience."
Friday's fresh plunge in bond prices pushed up 10-year US Treasury yields to the highest since July 2007 at 4.85% per annum – more than 1 percentage point higher from the end of June – as the 'bear steepener' continued across rich-world government debt.
Year-to-date, gold bullion is now trading dead-flat in US Dollar terms, bottoming at $1810 per Troy ounce on today's non-farm payrolls data before rallying to $1823 for a 2.5% weekly loss.
The world's 2 largest gold-backed ETFs – both listed on New York's stock market for US investors and trading – have meantime shrunk by 6.5% so far in 2023, with the GLD heading Friday for its 5th and the IAU heading for its 11th week of investor liquidation in a row.
Chart of GLD and IAU gold ETF trust funds' combined size in tonnes of bullion. Source: BullionVault
Combined, the shrinking number of shares now in issue for the SPDR Gold Trust (NYSEArca: GLD) and iShares' product (NYSEArca: IAU) need the smallest quantity of gold to back their value since January 2020 – eve of the global Covid pandemic, when gold cost $1585 per Troy – at a size first reached in May 2010.
Back then, the Dollar gold price traded at $1200 per Troy ounce.
"[This week's gold price] retracement has pushed some of the froth out of the market," reckons Robert Samson, multi-asset head at $200bn Asian asset management firm Nikko, speaking to Bloomberg.
Indeed, "Gold's recent tumble has made it more attractive in an environment in which elevated interest rates boost the odds of unexpected market ructions," says the news-wire, reporting his view.
"It's prudent to own some of the precious metal." 
Although this autumn's "historic bond correction [was] initiated [in] the United States," says a note from French bank Natixis, "it has swept through the European markets, despite a series of statistics confirming the weakness of activity in the Eurozone."
The quantity of bullion needed to back European gold ETFs as a group had already shrunk by 7.1% in the year-to-late-September according to data compiled by the mining industry's World Gold Council.
Today, and with the 3 largest German-listed gold ETFs continuing to shrink so far in October, gold priced in the Euro spiked down to a fresh 7-month low at €1722 per Troy ounce before rallying €10 into this week's final global benchmarking auction, the 3pm LBMA Gold Price in London.
A small rally in the British Pound meant the UK gold price in Sterling terms set a new 6-week low at £1490 on the US NFP jobs data from the BLS, before it also rallied 0.5% into the weekend but continued to hold below £1500 – a level first reached in July 2020.
The MSCI World Index of global stock markets flipped into the red for the day as US equities fell after the jobs data, and crude oil prices steadied after sinking more than 9% this week.
Monday will see the US bond market shut for Columbus Day, but the New York stock market will be open – as will the London bullion market – as China's financial exchanges return from the autumn Golden Week holidays.
Traders on the Shanghai Gold Exchange, which saw incentives for new bullion imports leap to record highs last month, will find the global gold price trading almost 3% cheaper in Dollar terms than where they left it.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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