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 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 investors to track any sustained or significant buying or selling activities by these ETFs.
ETF holdings fall more
In our last update on ETF holdings, we reported that total known ETF gold holdings stood at 1,588.1 tons as of June 11. Since then, gold holdings have fallen even more. As of June 19, known gold holdings were 1,586.8 tons. Holdings fell to 1,584.9 tons on June 15 but have recovered since then.
Most of the sell-off was probably due to the impending interest rate hike by the Fed. Any rate hike increases the opportunity cost of holding non-income–generating gold. However, when the Fed failed to give a clear signal on rate hikes in its meeting last week, gold holdings inched up. They still remain at low levels compared to the peak of 1,679.8 tons reached on February 24, 2015.
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 gold prices (GLD) 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.