Tracking ETF holdings is important
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.
Gold ETF holdings fall
As of August 7, known gold holdings were 1,511.8 tons. This is a huge fall of 5% in the last month. Previously, the gold holdings didn’t rise, despite the Greek (GREK) crisis and Chinese (MCHI) equity market fall. This is due to the overhang of the impending Fed rate hike in the US. Now, due to the falling prices and negative outlook on gold prices, gold ETF holdings are falling.
The SPDR Gold Shares ETF (GLD) is the world’s largest ETF. On August 7, 2015, its holdings fell to the lowest value of 667.69 tons since September 2008.
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 4.80% of GDX’s holdings.