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Investors move from gold to equity as prices reach two year low

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Friday morning’s gold price was USD1,203.25/oz, its lowest since August 2010, while trading briefly dipped below USD1,200/oz on Thursday.

 
Price falls have been accompanied by heavy selling from exchange-traded commodities.
 
Market wide data shows that most gold ETCs have seen outflows in 2013. According to the latest Deutsche Bank report, Gold Bullion Securities and Source Physical Gold each lost over GBP50m last week (17 to 21 June) although ETFS Physical Gold saw a small inflow.
 
Similar trends have been seen through Hargreaves Lansdown’s Vantage stockbroking platform. There has been an increase in the number of sellers of gold ETCs which has been accompanied by a rise in the number of investors buying equity ETFs products. On the HL Vantage platform not one gold ETC has shown net inflows in June, though demand has been strong for FTSE100 and S&P500 funds.
 
Adam Laird, passive investment manager at Hargreaves Lansdown, says: “The volatility in the gold price has spooked investors. In previous drops, demand for the metal has been balanced with some investors taking an opportunity to top up holdings. We do not see this happening at the moment.
 
“Many investors have bought gold for its long term properties- traditionally it has been a store of value and a hedge against inflation. Gold can still be useful for diversification but as we have seen, it is not a low risk asset. The price could well fall lower.
 
“More generally, investors have seen opportunity in price falls. We have seen clients moving into equity- UK products have really picked up pace in the last month. North America has been popular with ETF investors too, an area where there are few successful active fund managers.”

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