Gold price may be pulling back, ETF investors are not
Gold continued its retreat from 13-months highs to trade below $1,250 an ounce on Monday, but the pullback only convinced investors in physical gold-backed ETFs to pour in more money.
On Monday gold bulls bought a net 2.7 tonnes in industry bellwether SPDR Gold Shares (NYSEARCA:GLD) which represents more than 45% of holdings in gold ETFs around the world. Over the last five days inflows topped 31.5 tonnes.
The fund has only experienced six days of net redemptions this year
Last week GLD saw $1.4 billion worth of inflows in just a single day after a jump in the gold price combined with investors buying the equivalent of 11.9 tonnes. The fund which was launched in 2004 has only experienced six days of net redemptions this year and is worth $10.9 billion more than at the start of the year.
On August 22, 2011 when gold was hitting record highs above $1,900 an ounce GLD became the largest ETF in the world briefly surpassing the venerable SPDR S&P 500 trust at a net asset value of $77.5 billion. Gold holdings in the trust would peak more than a year later in December 2012 at 1,353 tonnes or 43.5 million ounces, representing half the ETF gold held around the world.
Global vault holdings have swelled to over 1,800 tonnes, an 18-month high following net inflows of more than 330 tonnes so far this year. This year has seen a definite reversal of the trend during the last three years when a staggering 1,198 tonnes left funds.
Despite the softer trend over the past couple of days gold is still experiencing one of its best starts to a year in decades. Gold is up 17.4% year to date thanks to safe haven buying as investors seek cover from turmoil on financial markets, fears over the economic outlook and the push by central banks around the world into unprecedented negative interest rate territory.