The violent pullback in gold prices this month has stoked physical demand for the precious metal from bargain hunters, but ETF investors continue to sell.
Bullion holdings in gold exchange traded products are down 166.3 metric tons so far in April, the largest monthly decline ever, according to Bloomberg.
“The key question in the near term is whether retail and jewellery demand can continue to counter ETP outflows and the rise in gross shorts,” Barclays analysts said in the story. “In our view, the vulnerability of further ETP outflows subsides should prices recover to above the $1,500/ounce level or equity markets underperform, given the stronger correlation between the two.” [Gold ETFs: ‘Heavy Disinvestment]
SPDR Gold Shares (NYSEArca: GLD) is the largest gold ETF. It currently holds 1,083 metric tons of gold valued at $51.2 billion. At the end of March it held 1,221 metric tons and $62.7 billion in assets. The ETF has fallen 13% in price year to date.
While the gold sell-off has prompted some buying from consumers, it has resulted in “panic selling among ETF holders,” writes Joe Weisenthal at Business Insider.
In recent days that the outflows from ETFs have been “massive, offsetting any demand from physical,” he added.
GLD has experienced net redemptions of $13.2 billion so far this year, according to IndexUniverse flow data.
Full disclosure: Tom Lydon’s clients own GLD.