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Precious metals funds worldwide bleed $1.2 billion, most since December '13: BofA

July 31, 2015 2:15 PM EDT

By Sam Forgione

NEW YORK (Reuters) - Investors worldwide pulled $1.2 billion out of precious metals funds in the week ended July 29 on expectations for higher U.S. interest rates and weakness in Chinese shares, data from a Bank of America Merrill Lynch Global Research report showed on Friday.

The outflows from the funds, which mainly invest in physical gold, were the biggest over any week since December 2013, according to the report, which also cited data from fund-tracker EPFR Global.

Stock funds attracted only $200 million in inflows in their fourth straight week of new demand, while bond funds posted $400 million in outflows, their first withdrawals in three weeks.

The outflows from precious metals funds came as spot gold prices hit $1,077.00 an ounce, their lowest level in 5-1/2 years, on July 24.

Gold prices have suffered this year from expectations that the U.S. Federal Reserve is on track to raise interest rates for the first time in nearly a decade, which is expected to boost demand for higher-yielding Treasuries at the expense of non-yielding bullion.

A sudden, sharp rout across New York and Shanghai markets intensified selling pressure on the yellow metal over the weekly period. Chinese shares posted their biggest fall in eight years on July 27, with Shanghai shares dropping 8.5 percent.

"Investors positioning for higher U.S. rates & U.S. dollar by selling gold & credit and buying Japan & Europe stocks," Bank of America Merrill Lynch strategists wrote in the report.

Japanese stock funds attracted $1.8 billion in new cash after posting $500 million in outflows over the prior week, which had been their first outflows in eight weeks. European stock funds attracted $2.9 billion in their 11th straight week of inflows.

Those inflows came despite a 1.6 percent drop in the FTSEurofirst 300 index of top European shares over the weekly period, partly on the steep decline in Chinese stocks.

Chinese stock funds posted $1.2 billion in outflows in their third straight week of withdrawals, according to EPFR Global data. The outflows have come after record $13 billion inflows in the first full week of July.

Funds that specialize in U.S. shares posted $2.2 billion in outflows over the weekly period as the benchmark S&P 500 stock index slipped 0.3 percent.

(Reporting by Sam Forgione; Editing by Jennifer Ablan and Lisa Von Ahn)



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