Contango Report: Bernanke On Gold As ETF Outflows Continue

Includes: GLD
by: Hard Assets Investor

By S.M. Brorup

Prices are rising, but investors may not need gold's disaster insurance.

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Contango Watch: Gold more than halved its mild contango this week. The move comes on the back of prices rising more than $1,300 and Fed Chairman Ben Bernanke's statements to Congress:

'Gold is an unusual asset. It’s an asset that people hold as a sort of disaster insurance,' he said. 'They feel if things go really badly wrong, at least they'll have some gold in their portfolio. I suppose that one reason gold prices are lower is that people are less concerned about extreme outcomes, particularly negative outcomes, therefore they feel less need for whatever protection gold affords.'

That theory continues to gain support from the massive outflows from gold ETFs. This week, gold funds dominated HAI's Commodity ETF Flows' Top 5 Redemptions chart, accounting for four of the five, while precious metals overall lost $148 million. However, GLD's hemorrhaging of assets slowed to a mere $162.26 million in outflows for the week, but only time will tell if the former giant will recover.

"Because gold ETFs have seen further -- albeit moderate -- outflows, the latest price movement is likely to have been facilitated above all by speculative financial investors," Commerzbank said in a note.

Roll Costs: It costs investors 0.27% annualized to roll front-month gold contracts, down from a cost of 0.61%.

Bottom Line: Mild Contango

Note: Data as of close on July 19, 2013; data courtesy of