Why tracking ETF holdings is important
Investors looking to gauge gold’s price outlook should monitor flows into and out of gold ETFs. While outflows from gold ETFs led to a ~28% fall in gold prices in 2013, ETF inflows supported gold prices in 2016 and 2017. When sentiment turns, prices can easily go the other way, leading to a huge sell-off.
ETF holdings on a rise
Gold ETF holdings are on a rise. According to data compiled by Bloomberg, gold ETF holdings rose to a total of 2,250 tons on January 22, 2018, the highest level seen since May 2013. Gold’s rise in the new year has encouraged investors to pile into the metal. Concerns regarding US policies, which led to a government shutdown and weaker US dollar, have kept the metal buoyant in the new year. Investors may also be drawn to gold because inflation seems to be picking up the pace, as indicated by December 2017 data.
ETF holdings and gold price
The SPDR Gold Shares ETF (GLD) and the iShares Gold Trust ETF (IAU) have risen almost 3% this month. An early-stage recovery in gold could prompt a full-fledged bull market. Concerns regarding peaking stock markets, rising inflation, and geopolitical issues could be key factors behind such a recovery.
A further recovery in prices would support stock prices of gold companies such as Barrick Gold (ABX), AngloGold Ashanti (AU), B2Gold (BTG), and Yamana Gold (AUY). Collectively, these four stocks form 13.7% of the VanEck Vectors Gold Miners ETF (GDX).