Gold equities lure investors after April bullion rout

Fri Sep 13, 2013 9:56am EDT
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* Precious metals inflows in equity funds at $275 million in July and August

* Only one of top 10 gold and precious metals equity funds shows net outflow

* Precious metals ETFs outflows at $2 billion in July and August

By Clara Denina and Clara Ferreira-Marques

LONDON, Sept 13 (Reuters) - After a once-in-a-generation plunge in the bullion price left investors nursing their wounds, gold equities - long unloved - showed the biggest two-month net inflow for two years in July and August.

That might in part be thanks to a recovering gold price, but also, analysts say, because the miners have taken hefty writedowns, slimmed down projects and put others on hold to save cash, after years of chasing volume at all costs.

A recovery in the price of gold has not, after all, helped gold exchange-traded funds (ETF), which are still seeing outflows.

ETFs have been exceptionally successful since their inception in 2003, responding to the needs of sophisticated investors looking for tools to take full advantage of soaring gold prices. They absorbed 2,691 tonnes of gold over the following 10 years, as gold prices benefited from ultra-loose monetary policies around the world.

But investors started to dump the ETFs when the 12-year-long upward trajectory of gold prices came to an abrupt halt in April; spot gold dropped $200 an ounce, or 13 percent, in two days, its sharpest slide in 30 years, after the U.S. Federal Reserve indicated its plan to taper off monetary stimulus.   Continued...