Why Some Money Managers Are Losing Faith in Gold-Backed ETFs

Gold and ETFs drop

The downfall in gold has led money managers to be pessimistic about precious metals, especially gold. Money managers have been steadily decreasing their net long positions in gold-backed ETFs. Global demand for gold was lackluster. Gold seemed to be headed for a third straight annual decline, which would be the longest slump since 1998.

However, some big hedge fund investors like John Paulson are maintaining their faith in gold-based ETFs such as the SPDR Gold Shares (GLD), holding 9.2 million shares. With a 10.1% loss in gold for the year so far, GLD has lost 9.7% on a year-to-date basis. The iShares Gold Trust (IAU) has also followed the losses in gold, retreating 9.5% for the year.

Why Some Money Managers Are Losing Faith in Gold-Backed ETFs

Mining companies

IVA (International Value Advisers) fund had raised its position in the iShares Gold Trust (IAU) by 2.9% during the third quarter. IAU now comprises of 5.1% of the total holdings of the IVA Fund. IAU and GLD have gained 0.88% and 0.78%, respectively, on a five-day-trailing basis despite the loss in gold of 1.4%. GLD and IAU are currently trading at $102.5 per share and $10.3 per share.

The mining companies that ended in red during the past five trading days include Yamana Gold (AUY), RandGold Resources (GOLD), Pan American Silver (PAAS), and Coeur Mining (CDE). These stocks lost 5%, 0.6%, 1%, and 0.76%, respectively, on a five-day-trailing basis. Together these four companies comprise 11.1% of the VanEck Vectors Gold Miners ETF (GDX). The GDX indicator itself has however gained a marginal 0.9% on a five-day-trailing basis.