ETF holdings hit a new 5-year low, affecting gold stocks

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Monitoring ETF holdings             

Monitoring exchange-traded funds (or ETFs) is important for investors because they’re very large holders of physical gold. Outflows from ETFs led to an approximate 28% fall in gold prices in 2013, selling a combined 881 tons of gold. So investors should keep an eye on any sustained buying or selling in gold-backed ETFs.

ETF holdings

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Dwindling ETF holdings

The total known ETF holdings include 14 gold ETF holdings. These include the largest physical gold-backed ETF—the SPDR Gold Shares (GLD). Global ETFs backed by physical gold saw outflows of 30 tons in first 25 days of November. We had already seen outflows of 42 tons and 33 tons of gold in September and October, respectively.

Total holdings were 1,616 tons as of November 25. Gold ETF holdings have fallen to a five-year low. Recent outflows suggest that investors might be moving into other risky assets like equities, as US economic prospects have started looking up.

More than $1.3 billion has been pulled from US exchange-traded products tracking precious metals in October. This is the biggest monthly decline this year.

Impact on gold prices

The recent outflows in ETFs are negative for gold prices and gold stocks—like Goldcorp Inc. (GG), Barrick Gold Corp. (ABX), Newmont Mining Corporation (NEM), Kinross (KGC), and Yamana Gold (AUY). The outflows are also negative for ETFs like the Gold Miners Index (GDX).

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