SPDR Gold Shares (NYSEArca: GLD), the world’s largest bullion-backed ETF, could experience further redemptions totaling up to 4 million ounces, or nearly 125 metric tons of gold, after already losing 300 tons since the start of the year, according to Deutsche Bank analysts.
“We expect that the bulk of the drawdown comes from institutional investors rather than retail investors,” Deutsche Bank said, according to a Bloomberg News report. “If in fact only institutional selling is occurring in the gold ETF then we expect that nearly two-thirds of the selling that is likely has probably already passed. As SPDR is roughly half of total physically backed ETFs, this could imply a further 4 to 8 million ounces selling if macro fundamentals continue to move against gold.”
That means all gold ETFs could experience an additional 250 tons worth of selling.
Other bullion-backed ETFs include iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL).
Gold futures were lower Wednesday morning to trade just above $1,400 an ounce.
GLD is down about 15% year to date. The $48.5 billion ETF holds about 1,052 metric tons of bullion, down from nearly 1,351 tons at the end of 2012.
“In the short term, gold prices remain caught between the recent slowdown in US activity and the significant decline in ETF holdings,” Goldman Sachs analysts said in a note, according to BullionVault. “”While the sell-off in gold prices has been faster than we expected, with prices below our near-term forecasts, further unwind of ETF positions would likely continue to precipitate this decline.”
SPDR Gold Shares
Full disclosure: Tom Lydon’s clients own GLD.
The opinions and forecasts expressed herein are solely those of John Spence, 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.