Largest gold ETF highlights bullion traders' confusion

On one hand, investors are awaiting clues this week on the timetable for reducing the US Federal Reserve's balance sheet, which could curb demand for gold. Rising equities are also hurting the metal's appeal. On the other hand, mounting US-North Korea tension and concern over the economic outlook reinforce the case for owning bullion, which has gained 14% this year.

The dilemma is playing out in ETFs. The put-to-call ratio of SPDR Gold Shares, the largest ETF backed by the metal, is the highest in two years, signalling bearish sentiment may be gaining momentum. At the same time, investors poured $177 million into SPDR Gold last week, a fifth straight weekly inflow.

"This is the confusion for major traders," George Gero, a managing director at RBC Wealth Management, said. "You've got a lot of worries this week. It means more people have more fears than before and they're protecting positions."

Gold futures for Dec delivery retreated 1.1% to settle at $1,310.80 an ounce at 1:40 pm on the Comex, extending a 1.9% loss last week that was the biggest for a most-active contract in more than two months.