SPDR Gold Shares (NYSEArca: GLD) and other bullion-backed ETFs are set for the biggest quarterly loss in their history. GLD is down 23% since the end of March, including Wednesday’s sell-off.
Gold prices were trading around $1,230 an ounce Wednesday afternoon, touching their lowest levels since August 2010.
About $60 billion of value has been erased from gold ETFs so far this year due to redemptions and falling gold prices, according to Bloomberg.
“We’ll need to see evidence of more physical buying and demand from central banks before it really turns around. No one wants to catch a falling knife,” said Bart Melek, head of commodity strategy at TD Securities, in the report.
GLD, the largest gold ETF, started the year with about 1,351 metric tons of bullion. It now holds about 970 tons, a decline of roughly 28%.
The latest leg down in gold prices after a 12-year rally comes amid speculation the Federal Reserve will taper its bond purchases.
Since mid-February, about 550 metric tons of gold have flowed out of ETFs. “That’s the equivalent of saying we’ve added to the gold market an additional 11% on top of 2012’s gold (mine) output,” said Natixis analyst Bernard Dahdah in a Reuters report.
“We bought gold for two reasons – because we were worried about the inflationary impact of policy and because we thought the financial system was going to fall apart,” added Sean Corrigan, chief investment strategist at Diapason Commodities Management, in the article. “Although it may be completely the wrong judgment, the market has decided that none of those at the moment is a concern.”
Silver ETFs have suffered even bigger losses than gold funds in the second quarter. The iShares Silver Trust (NYSEArca: SLV) was down over 4% on Tuesday, taking its quarter-to-date loss to 34%.
SPDR Gold Shares
Full disclosure: Tom Lydon’s clients own GLD and SLV.