The Gold Report

The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust (GLD), said its holdings fell 21.7 tons or 1.9% in January, against a rise of 63.36 tons or 8.1% in the same month of 2009.

Data showed the trust, which issues securities backed by physical stocks of gold, held 1,111.922 tons of bullion on Friday, the last trading day of January, against 1,133.622 tons on Dec. 31.

The SPDR fund saw record inflows in the first quarter of 2009 as fears over the outlook for the financial sector fuelled buying of the metal as a safe haven. The fund is the world's number six gold holder, ahead of Switzerland, China and Japan.

Analysts fear sustained outflows from gold ETFs if investors' attitude towards bullion sours, which could prove a drag on prices.

"Gold and silver investment demand has waned since the end of 2009, particularly as the U.S. dollar rebounded versus the euro," said BNP Paribas analyst Anne-Laure Tremblay. "In this context, most ETFs saw net outflows in January."

"Going forward, we expect gold to trend lower until the third quarter of 2010, and as a result, net investment demand generally for precious metals—and therefore inflows into ETFs and exchange traded futures—should be more subdued than at the same time last year," she said.

The largest silver-backed fund, the iShares Silver Trust (SLV), saw a 107.99-ton or 1.1% decline in its holdings last month, versus a rise of more than 660 tons or 9.7% in January 2009.

The decline in New York gold and silver ETF holdings has been accompanied by hefty inflows into new platinum and palladium funds launched in January by a U.S. unit of London's ETF Securities.

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