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Why gold ETF holdings are dwindling

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Monitoring ETF holdings

Outflows from exchange-traded funds (or ETFs) led to an approximate 28% fall in gold prices in 2013, selling a combined 881 tons of gold. As a result, it’s important for investors to monitor changes in ETF holdings.

ETFs are very large holders of physical gold, making it especially important to watch out for any sustained buying or selling trend of gold-backed ETFs.

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Current ETF holdings

There are 14 current gold ETF holdings. These include the largest gold-backed ETF Standard & Poors depositary receipt (or SPDR) Gold Shares (GLD). Overall gold holdings in ETFs were 1,611 tons as of December 4, 2014, which is its lowest value in five years. May 2009 saw a similar level. There has been an outflow of 32 tons of gold in the last 30 days. Since August, there has been an outflow of 121 tons.

Recent outflows suggest that investors might be moving into other risky assets such as equities since U.S. economic prospects have started to look up.

Impact on gold prices

Recent outflows in ETFs over the last four months are negative for gold prices and gold stocks such as Goldcorp Inc. (GG), Barrick Gold Corp. (ABX), Newmont Mining Corporation (NEM), Kinross Gold Corporation (KGC), and Yamana Gold (AUY), as well as ETFs such as the Gold Miners Index (GDX).

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