July 11, 2018 / 5:27 PM / 4 months ago

Amid trade war, U.S. fund investors find little safe haven in gold

    By Trevor Hunnicutt
    NEW YORK, July 11 (Reuters) - The fact that investors are
siphoning money out of stocks is not helping gold, with the
safe-haven asset suffering as people wary of a global trade war
flock to the U.S. dollar.
    U.S. fund investors pulled $1 billion from commodity funds,
including those invested in the precious metal, the largest
withdrawals since July 2017, Investment Company Institute (ICI)
data showed on Wednesday. 
    Worries over trade are mounting, helping to push investors
away from stocks but also toward the U.S. dollar, which
has rallied 5 percent in the past three months against the
currencies of major U.S. trading partners. That hurts demand for
bullion, which is priced in dollars.
    Data from Thomson Reuters' Lipper research unit last week
showed precious metals commodities funds posted nine consecutive
weeks of withdrawals, with $2 billion pouring out in June alone,
the most since December 2016.
    Indeed, trade is unlikely to fade in importance to
investors. Washington on Tuesday issued a list of thousands of
Chinese imports that the Trump administration wants to target
with new tariffs. In response, China accused the United States
of bullying and warned it would hit back.
    William Rhind, chief executive officer at fund manager
GraniteShares Inc, said a trade war could eventually generate
inflation that will benefit gold.
    "At the moment, the positive inflationary pressures caused
by trade tariffs are being beaten back by dollar strength," said
Rhind.
    "As the tariffs take hold and the market adjusts to the
effects, we expect inflationary pressures to increase, which
will benefit holders of gold and commodities."
    Some $10.6 billion rolled out of U.S.-based stock mutual
funds and exchange-traded funds (ETFs) during the most recent
week, ICI said, bringing three-week withdrawals to $33.7
billion. The data covers the six days through July 3; the United
States observed the Independence Day holiday on July 4.
    A subset of equity funds specifically focused on
international shares managed to pull in $762 million, their
first week of positive sales in the past four, the trade group
said.
    Bond funds attracted $4.6 billion in the latest week,
according to the data. U.S.-based debt funds have not seen
withdrawals since February.
    The following table shows estimated ICI flows for mutual
funds and ETFs (all figures in millions of dollars):
               7/3      6/27     6/20    6/13    6/6/2018
 Equity        -10,614  -17,948  -5,172  6,773   -3,651
    Domestic   -11,376  -12,535  -3,879  7,815   -4,532
    World      762      -5,413   -1,293  -1,042  881
 Hybrid        -2,552   -1,214   -857    -1,975  -1,118
 Bond          4,587    2,980    4,548   5,564   1,376
    Taxable    4,231    2,454    3,806   5,238   727
    Municipal  356      525      742     326     648
 Commodity     -1,027   -612     -264    -416    -761
 Total         -9,606   -16,794  -1,744  9,946   -4,155
 
 (Reporting by Trevor Hunnicutt)
  
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