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What Do Changes in Gold ETF Holdings Mean for Gold Prices?

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Nov. 8 2017, Updated 5:05 p.m. ET

Why tracking ETF holdings is important

Investors looking to gauge the gold price outlook should monitor the flows into and out of gold ETFs. The outflows from gold ETFs led to a ~28% fall in gold prices in 2013. ETF inflows supported gold prices in 2016 and have so far in 2017 as well. When the sentiment turns, they can easily go the other way, leading to a huge sell-off.

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Movements in ETF holdings

According to the World Gold Council (or WGC) report, investors bought $2.2 billion worth of gold ETFs in September. As expected, the SPDR Gold Trust (GLD), which is the largest physically backed gold ETF, and the iShares Gold Trust (IAU) accounted for most of the fund inflows into ETFs. Year-to-date, the fund inflows into US-listed gold ETFs have totaled $3.4 billion. The inflows are lower than they were last year when just GLD and IAU accounted for ~$15 billion of inflows in the first nine months of the year.

While ETF holdings showed a marked improvement in September after a weaker few months, October also didn’t turn out very good for them. Investors could see more potential in the risk assets as compared to gold currently.

ETF inflows and gold prices

Because ETFs are large holders of physical gold and silver, the recent bullish sentiment might be a further short-term positive for gold prices. As a result, this sentiment could positively affect precious metal prices and stocks like B2Gold (BTG), Sibanye Gold (SBGL), Rand Gold (GOLD), and Silver Wheaton (SLW). It could also be positive for the VanEck Vectors Gold Miners ETF (GDX).

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