Gold prices ease as ETF holdings fall

Reuters/New York

Gold prices eased yesterday as demand waned for gold-backed exchange funds and investors continued to digest the effect of wide-ranging US government spending cuts on bullion prices.

Trading was quiet as a lack of major US economic indicators and a flat US equities market yesterday failed to provide gold with a new catalyst.

Some investors remained on the sidelines, with President Barack Obama and congressional Republicans still apart on a deal to avert automatic US budget cuts. The White House ordered cuts in government spending on Friday night.

Gold, a traditional safe haven in times of economic uncertainty, is also viewed as an inflation hedge, and a major reduction in US spending has assuaged most inflation concerns.

Also weighing on investor sentiment, data showed holdings of the world’s largest gold-backed ETF the SPDR Gold Trust posted a ninth consecutive daily decline on Friday.

“February marked the largest monthly outflow across physically backed gold exchange-traded products. Continued net redemptions at this pace pose the largest downside risk to prices, in our view,” Suki Cooper, precious metals strategist at Barclays Capital, said in a note.