Why Gold ETF Demand Is Reviving
Why tracking ETF holdings is important
Outflows from ETFs led to a ~28% fall in gold prices in 2013—the equivalent of selling 881 tons of gold. For this reason, investors track any sustained or significant buying or selling activities by ETFs.
While ETF inflows supported gold prices in 2016 and have so far in 2017 as well, when the sentiment turns, they can easily go the other way, leading to a huge sell-off.
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Gold ETFs holdings rise
The SPDR Gold Shares (GLD) bottomed out in the first week of August, after which they started turning around. The buying accelerated toward the end of August and at the start of September. According to investing.com, GLD holdings as of September 5, 2017, had risen 6.8%, or by 53.2 tons, in less than a month.
This rise was accompanied by a gold price rally of almost the same intensity. While some of these flows could be due to safe-haven buying prompted by North Korean tensions, stretched US equity market valuations might also have had something to do with GLD inflows.
ETF inflows and gold prices
Because ETFs are large holders of physical gold and silver—and the market tends to follow large money—the recent bullish sentiment might be a further short-term positive for gold prices.
As a result, this sentiment could positively affect precious metal prices and stocks like B2Gold (BTG), Sibanye Gold (SBGL), Rand Gold (GOLD), and Silver Wheaton (SLW). It can also be positive for the VanEck Vectors Gold Miners ETF (GDX).