August saw a falloff in gold-backed ETF inflows along with central banks slowing down their purchases. Central banks have always been price-sensitive, said Jeff Christian, managing partner of CPM Group, and would stop buying if the price of gold is too high. As for exchange-traded fund (ETF) holdings, not all of the flows this year was from investment demand to begin with.
"It was clear to us that some bullion banks have been taking gold and silver, physical metal depositories, and selling that in exchange for newly issued shares of the ETFs, and so some part of that [gold and silver ETF inflows] wasn't investment demand, it was banks disgorging physical silver and replacing it on their balance sheet with ETF shares," Christian told Kitco News.