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Gold ETF Holdings Fall to the Lowest Level since 2009

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Why should you track gold ETF holdings?

According to World Gold Council data, ETFs accounted for close to 9.20% 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 881 tons of gold. For this reason, investors should track any sustained or significant buying or selling activities by these ETFs.

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Gold ETF liquidations continue unabated

In our last update on ETF holdings, we reported that total known ETF gold holdings stood at 1,585.3 tons as of July 10.

Since then, gold holdings have fallen by 21.5 tons. As of July 21, known gold holdings were 1,563.8 tons. This is the lowest level in gold ETF holdings since March 2009. The sell-off was led by the largest physically backed gold ETF—the SPDR Gold Trust (GLD). GLD’s holdings fell to 22.1 million ounces on July 22. This is its lowest level since August 2008. GLD’s holdings have nearly halved from its peak in 2012.

The huge sell-off in the Chinese gold market on July 20 is negatively impacting the sentiment. The firming US dollar and the positive data out of the US are strengthening the case for a hike in the US interest rates this year—maybe as early as September. All of this is negative for gold.

Implications for gold 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 4.80% of GDX’s holdings.

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