Monday October 21, 2013 9:54 AM
(Kitco News) - The pace of gold outflows from exchange-traded
funds has picked up again in October although nowhere near as heavy
as it was during a spring sell-off, analysts said.
"We have seen a very sharp decline in gold ETF holdings since
the end of 2012," said Bart Melek, head of commodities strategy
with TD Securities. He and others pointed out that holdings
globally are down by a little more than a quarter in 2013 so
"The trend has slowed on the downside," Melek said. "It was
stable in August and in September, but started accelerating to the
downside in October where we've seen a fairly large slide from the
10th of October to the current level.
"But I would say it's a lot more stable that it was…. Much has
to do with the fact we've seen gold come back somewhat."
Robin Bhar, metals analyst with Societe Generale, described the
slide in recent weeks as "a trickle rather than deluge."
Global holdings in exchange-traded products have fallen to
around 2,027 metric tons, around the low from May 2010, according
to data from Barclays. The record was 2,768.16 tons at the start of
Outflows for October so far are around 34 tons, surpassing 25.7
tons in September and 17.9 in August, said Suki Cooper, vice
president and precious-metals analyst with Barclays. Holdings in
the world's largest gold ETF, SPDR Gold Shares (
), are at their lowest level since February 2009, Barclays
Holdings in GLD stood at 882.23 metric tons as of Friday,
according to the ETF's Web site. They fell 8.75 tons over the
previous week and are now down 468.59 tons, or 35%, since 1,350.82
as of the end of 2012. Redemptions were especially heavy when gold
was selling off this spring, with an outflow of 142.72 tons in
Data compiled by CPM Group show that global ETF gold holdings
have fallen to around 63 million ounces from a record 86.5 million
at the end of 2012, said Carlos Sanchez, director of asset
"The ETF outflows continue. It looks like a million ounces (in
October) so far through the 18th," he said. "We had larger
withdrawals earlier this year. We saw funds reducing their gold
declined, and you likely had retail investors reduce their exposure
as well. More recently, it doesn't look like the declines are as
sharp as they were early this year, but they are still declining
"That said, you do have investors continuing to hold onto gold.
Sixty-three million ounces (in current ETF holdings) is a lot of
gold," Sanchez said.
The heaviest outflows in global gold ETFs occurred in the
April-June period. They stabilized during the second half of the
summer, then picked up again in recent weeks when gold came under
renewed pressure, Bhar said. Spot gold hit a three-month low of
$1,251.80 an ounce last week, although it subsequently bounced back
"I suspect they will pick up if the price were to track back to
the lows again," he said. "The fact that the gold price has
stabilized and rallied back to current levels for the moment (means
that) we're not seeing any heavy outflows. I think we're seeing a
trickle rather than deluge."
Gold ETF flows are "very important" to the market, Bhar said.
The first physically backed gold ETF was launched a decade ago and
interest took off in earnest in 2004 when SPDR Gold Shares was
started. Metal is put into storage to back ETF shares that trade
like a stock but track the price of the commodity, thereby adding
to demand for the metal.
This demand grew in conjunction with a bull market in gold that
took the precious metal to a record high of $1,921 in 2011.
Conversely, redemptions in ETFs added to downside pressure on the
market when prices turned lower, Bhar said.
"Price action seems to be a trigger for ETF outflows. Investors
seem to be less interested in holding gold the through ETFs," Bhar
said. "ETFs are a good way to get exposure because they are low
cost and easy to understand. But if the market has gone cool on
gold, then you're going to see more liquidation."
In particular, he added, some investors have rotated away from
the gold ETFs and toward equities this year. The S&P 500 index
hit a fresh record high last week and extended that in early trade
While agreeing that ETF gold holdings are price sensitive, Melek
said much of what investors do will hinge on their expectations for
"It doesn't necessarily mean that you have a build in (
) inventory every time prices go higher, although that is the
trend," he said. "For the most part, it's long-term price
expectations driving this. At this point, they're fairly negative.
But the moroseness, or negativity, has kind of petered out in terms
of where people see prices going. We've corrected quite a lot ….
now many people are adopting a wait-and-see attitude at these
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By Allen Sykora of Kitco News firstname.lastname@example.org