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FUND FLOWS: Investors Gave Gold a Contrarian Cold Shoulder

With the U.S. and North Korea talking preemptive strikes, why did money flow out of some sectors?

With the second-quarter earnings season in the U.S. beginning to wind down, North Korea and the U.S. exchanging threats on a near daily basis, lawmakers on both sides of the Atlantic on holiday and the calendar free of major central-bank policy meetings until the ECB convenes in early September, EPFR-tracked sector fund flows had a contrarian flavor in early August.

Against a backdrop of geopolitical tensions, investors pulled money out of gold funds for the third time in the past four weeks. They responded to expectations that the U.S. Federal Reserve will move cautiously during the second half of 2017 by committing over $900 million to financial sector funds and redeeming over $500 million out of consumer goods funds. With energy companies reporting the biggest year-on-year earnings growth among U.S. sectors and oil prices making another run at the $50-a-barrel mark, they yanked another $518 million from energy sector funds.

Commodities sector funds also recorded net outflows for the week. That was, however, driven by the redemptions from gold and precious metals Funds, which offset flows into funds focused on industrial commodities such as iron and copper.

The inability of U.S. President Donald Trump, who is now occupied with North Korea's challenges, to advance his agenda continues to weigh on a number of sector fund groups. Infrastructure sector funds extended their longest run of outflows since early fall of 2016, and flows to both technology and health care/biotechnology sector funds were subdued. But industrial sector funds recorded their biggest inflow since mid-February.

Cameron Brandt is director of research for EPFR Global, an Informa Financial Intelligence company.

TAGS: Mutual Funds
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