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Why Are Gold ETF Holdings Declining?

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Apr. 10 2015, Updated 10:05 a.m. ET

Monitoring ETF holdings

Outflows from ETFs led to a ~28% fall in gold prices in 2013. ETFs sold 881 tons of gold. The sheer size of their holdings makes it important for gold investors to monitor changes in ETF holdings.

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ETF holdings wane

There are 14 known gold ETF holdings. The largest physical-gold-backed ETF is the SPDR Gold Trust (GLD). Global ETFs have sold gold to the tune of about 48 tons in one month ending April 1. Gold holdings were 1,621.2 tons on April 1 compared to 1,669.7 tons on March 2.

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 continues.

Impact on gold prices

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 4.8% of GDX’s holdings.

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