Gold ETF Liquidation Far From Over, Could Push Prices Below $1,300

The absolutely relentless decline in gold exchange-traded fund holdings continues. Since the start of the year, ETFs have liquidated 15,200,000 troy ounces (473 metric tons) of gold. To put that in perspective, that represents almost 11% of total annual gold demand in 2012.

Gold ETF Holdings

ETF Gold Holdings

Just who is selling these ETFs? In a recent interview with HAI (see “D’Agostino: Gold Physical Sales Still Up 50%, Gold ETFs Shake Out Leveraged Speculators”), Ed D’Agostino, general manager of Hard Assets Alliance, said that speculators are the culprit:

‘…[I]t’s the speculators who are now selling out of their positions,’ he said. ‘Speculators use leverage, and when prices drops and the margin calls come in, you see massive redemptions. That’s what’s happening now.’

Given this enormous amount of selling, it’s a wonder gold prices have been able to hold up as well as they have. Physical buyers have stepped up to the plate with purchases, which has offset the ETF selling to some extent. But if we see another 5 million or 10 million troy ounces come out of ETFs, gold prices will likely tumble to new lows below $1,300.


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