Gold price ignites as top gold ETF hits record inflows

Pigging out on bullion. Image by Camil Tulcan

The gold rally gained momentum on Monday as retail and institutional investors pile into the precious metal market.

Gold for delivery in August, the most active futures contract trading in New York, touched a high of $1,425.10 an ounce level in late afternoon trade. If the metal can hold onto these levels it would be the highest close since May 2013.

The Commitment of Traders report for the week ending 18 June saw large-scale speculators like hedge funds increase their net long gold positions – bets on rising prices – by more than a fifth to 590 tonnes.

Bullish bets wagered by hedge funds are now at a 16-month high, after a record increase in net long positions over the past three weeks

Bullish bets wagered by hedge funds are now at a 16-month high, after a record increase in net long positions over the past three weeks of some 488 tonnes. This time last year gold futures speculators were net short – bets that gold can be bought back cheaper in future – 317 tonnes of gold.

On Friday, investors poured a record $1.6 billion into SPDR Gold Shares (GLD), the largest physically-backed gold exchange traded fund. That was the largest inflow since the launch of the fund in 2004.

Gold bulls bought just over 35 tonnes of the metal on Friday bringing total holdings in GLD to just shy of 800 tonnes or 25.7m troy ounces, a third of the total held by the dozens of gold ETFs listed globally.

Graph: MINING.com Gold price $/troy ounce June 24, 2019

Number one for a day (or two)

Gold ETFs were credited for a big portion of gold’s uninterrupted 12-year bull run, because ETFs make it so easy to invest in the yellow metal. (And to cash out as gold’s 2013 annus horribilis so clearly showed.)

While launched a full 18 months after the first physically backed gold ETF was created in Australia, GLD quickly dominated the market.

GLD was listed on 18 November 2004 and enjoyed a pretty good first day. Investors bought just over 8 tonnes or 260,000 ounces of gold affording the fund a net asset value of $115 million.

In August 2011 when gold was hitting record highs GLD became the largest ETF in the world briefly surpassing the venerable SPDR S&P 500 trust’s net asset value

A mere two days later it would cross the $1 billion mark and by the time Thanksgiving arrived the following week gold bugs had snapped up more than 100 tonnes. The 1,000 tonne market would be crossed in February 2009.

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 (assets today $265 billion) 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. Global ETFs hit a record 2,632 tonnes or 93 million ounces of gold at the time.

Those who got in on the GLD ground floor are enjoying returns of more than 200%. That handily beats the returns of the S&P 500 since November 2004, even as the index hits fresh all-time records.

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