It’s worthwhile to monitor ETF holdings
Outflows from ETFs led to a ~28% fall in gold prices in 2013. That’s the equivalent of selling a combined 881 tons of gold. As a result, it’s important for gold investors to monitor changes in ETF holdings.
ETFs hold substantial amounts of physical gold and silver. It’s important for investors to track any sustained or significant buying or selling activities by these ETFs.
ETF holdings wane
There are 14 known gold ETF holdings. The largest physical-gold-backed ETF is the SPDR Gold Trust (GLD). Global ETFs are selling physical gold to the tune of about 20 tons in one month ending March 9.
The ETFs are probably responding to the recent strengthening of the US dollar and the corresponding weakness in gold prices. There are further expectations of the US dollar strengthening and a rate hike by the Fed, which is keeping pressure on gold and thus the sell-off.
Impact on precious metals
ETFs are large holders of physical gold, and any negative sentiment is felt across the market. Thus, selling by ETFs is negative for gold prices and stocks such as Goldcorp (GG), Barrick Gold (ABX), Newmont Mining (NEM), Kinross Gold (KGC), Yamana Gold (AUY), and Silver Wheaton (SLW). It’s also negative for the VanEck Vectors Gold Miners ETF (GDX). SLW makes up 4.6% of GDX’s holdings.