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ETF selling keeps gold under pressure

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Central-bank buying continues to support the gold price, with data from the International Monetary Fund showing both Russia and Kazakhstan bought gold for the seventh straight month in April, according to Alan Higgins, chief investment officer, UK at Coutts.

 
Other buyers of physical gold have emerged on dips, particularly jewellery-related buying from India and China.
 
The headwind remains selling by exchange-traded funds (ETFs), which has continued incessantly since last November, and has averaged daily sales of around 1.5 per cent of outstanding funds in recent weeks.
 
Gold holdings in ETFs have fallen by almost four million ounces (oz) in May, which compares with the 5.6 million oz that coincided with April’s steep selloff.
 
“Despite support by physical demand, it looks like the steady flow of selling by investors will keep gold under pressure,” says Higgins. “Although many of the risks that had driven demand for gold as a hedge have diminished, we still think gold has a valuable role to play in portfolios, particularly to mitigate the still-present risk of a sharp correction in equities and the continuing devaluation of major currencies through QE. We believe that gold will remain in a trading range between USD1,360 and USD1,480 per ounce.

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