Gold ETFs: Six Straight Months of Outflows

After consecutive years of higher gold prices, traders have finally begun letting go of the precious metal, with gold exchange traded funds experiencing their sixth straight month of outflows.

The SPDR Gold Trust (NYSEArca: GLD), the largest gold-related ETF, lost $2.9 billion in assets over May, according to IndexUniverse. Meanwhile, the ETFS Physical Swiss Gold (NYSEArca: SGOL) shrunk by $89.4 million and the iShares Gold Trust (NYSEArca: IAU) saw $371.5 million in outflows.

Overall, gold exchange traded products saw $5.7 billion in outflows last month, bringing year-to-date redemptions to $23.9 billion, according to BlackRock research note. Total gold ETP assets now sit at $96.2 billion, or 31.9% lower from the $141.2 billion at the end of 2012.

BlackRock analysts attribute the rapidly declining interest in gold to the growing speculation that the Federal Reserve’s monetary easing policies could end in the near term as the economy improves, which would force up interest rates. Consequently, a stronger U.S. dollar, greater demand for equities and shift away from traditional “safe haven” assets.

Gold futures were trading around $1,397 per ounce Tuesday.

Gold prices dipped below $1,400 Tuesday on concerns that India, the largest consumer of gold, would restrict imports, reports Lara Denina for Reuters.

“The news that the RBI will curb imports of gold by agencies has weighed prices down today as it is a wider restriction and could imply lower imports of gold into the country,” Societe Generale analyst Robin Bhar said in the article.

Despite recent correction in gold, investors should not shy away from the asset class altogether.

“While gold has historically been seen as a potential cash alternative in periods of economic uncertainty and a hedge against inflation concerns or a weakening dollar, many invest in gold as a long-term holding due to its diversifying properties,” BlackRock said. “Gold has historically shown little to no correlation with other major asset classes, including commodities, and gold is a beneficiary of negative real interest rates which have persisted for some time in many developed economies.”

For more information on gold, visit our gold category.

Max Chen contributed to this article.

Full disclosure: Tom Lydon’s clients own GLD.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.


Gold ETFs Are Liquidating By the Ton

An ounce of gold, often represented by a single American Eagle coin, is a fairly easy thing to visualize. Even a 400 ounce gold bar, like the ones held at Fort Knox, is a fairly fathomable concept. But when you try to get your head around just how much of the metal an ETF like the SPRD Gold Shares (GLD) owns, it can get a little daunting. And the same is true when you try to track how much they’ve had to sell as the price of gold slips to a 2-1/2 year low.

“300 tons,” says Tom Lydon, the editor of ETF Trends, in the attached video, calling the disposal of over 600,000 pounds of gold so far this year “amazing” and “incredible.”

This, of course, as the largest metal-tracking fund has gone from briefly being the biggest ETF, to being a top-5 player after being cut in half to approximately $46 billion in value today, holding just over 1,000 tons of gold in its vaults.

While gold is clearly out of favor forcing the hand of holders to sell into weakness, Lydon says it won’t always be that way.

“Central banks maybe aren’t as concerned,” he lists as one reason why gold is down. “I think the average investor, with stocks and bonds doing so well, I think they say, ‘hey, I don’t need to hedge, so that gold position I had, I’m going to put that into stocks for now.’”

It’s a reality, a trend, a self-perpetuating sell-off that seems to have no bottom in sight, as the darling of last decade turns into the dog of 2013.

“It’s been tough enough to beat the S&P this year, and if you’ve had money in gold, that has hurt you,” Lydon says.


How gold ETFs have transformed market in 10 years

The first gold-backed exchange-traded fund is now 10 years gold.

SAN FRANCISCO (MarketWatch) — Investors are celebrating the 10th anniversary of the world’s first exchange-traded fund backed by physical gold, and they’re in awe over how much the investment vehicle has altered the landscape for the precious-metals market forever.

MarketWatch told you almost seven years ago that change was already in motion. Still, at the time, it would have been tough to imagine the true scope of influence the gold ETFs have had on the market.

Now “it is widely acknowledged that the launch of gold [exchange-traded products] has had a very significant impact on the gold market and is now a key part of it,” Graham Tuckwell, chairman at ETF Securities, said in a press release marking the 10th anniversary of the first gold ETF.

On March 28, 2003, the first gold-backed ETF, developed by ETF Securities, was launched. It trades on the Australian stock exchange as the ETFS Physical Gold AU:GOLD +0.81% , with assets under management at about $602 million.

Since its launch, interest in gold has grown astronomically as prices GCK3 -0.62% have jumped to around $1,600 an ounce from about $332 at the time of the launch.

“We can certainly track the growth of gold ETFs since their invention, and see how investor interest in gold has growth significantly,” said Will Rhind, managing director of U.S. operations for ETF Securities. Globally, there are now 143 gold ETFs available, with the latest data showing assets under management at roughly $132 billion, he said.

At the end of 2003, AUM was at just about $191,000, ETF Securities data show.

The first gold-backed ETF in the United States, the SPDR Gold Trust GLD -0.57% , launched on Nov. 18, 2004.

GLD, the largest gold ETF on the market, is also one of the biggest funds in terms of value of the assets it manages. That makes it “incredibly influential in the overall investment marketplace — not just the gold market,” said David Beahm, executive vice president at precious-metals investment firm Blanchard & Co.

It has holdings valued at around $63 billion.

With asset values at that level, “gold has proved itself as a portfolio diversifier and a foundational asset rather than just a trading vehicle,” said Tom Lydon, editor and publisher of

“Gold ETFs now rival central banks in holdings,” he said.

Physically-backed gold ETFs as a group are the fourth-largest holder of gold, falling just behind the U.S., Germany and the International Monetary Fund and ahead of Italy and France, said Lydon, who is also president of investment advisory firm Global Trends Investments.