Tracking ETF holdings
According to World Gold Council data, ETFs accounted for close to 9.2% of all the gold investment demand in 1Q15. Outflows from ETFs led to an ~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 investors to track any sustained or significant buying or selling activities by these ETFs.
ETF holdings decline more
In our last update on ETF holdings, we reported that total known ETF gold holdings stood at 1,603.2 tons as of May 27. Since then, gold holdings have declined more. As of June 11, the known gold holdings were 1,588.1 tons.
GLD drops out of the top ten
Holdings in the world’s largest gold ETF—the SPDR Gold Trust (GLD)—have dropped to the lowest level since September 2008 at 704.2 tons as of June 10. GLD has also dropped out of the top ten US ETFs. GLD saw outflows of ~$900 million or close to 3% of its total assets during May.
Most of the sell-off is probably due to the impending interest rate hike by the Fed. Any hike would increase the opportunity cost of holding non-income generating gold. Improving equity markets are also providing a good alternative to gold for investors.
Implications for investors
Since ETFs are large holders of physical gold and silver, any negative sentiment is felt across the market. As a result, when ETFs sell off it’s negative for precious metal prices and stocks like Sibanye Gold (SBGL), B2Gold (BTG), Hecla Mining (HL), and Silver Wheaton (SLW). It’s also negative for the VanEck Vectors Gold Miners ETF (GDX). Silver Wheaton accounts for 4.8% of GDX’s holdings.