August and September were stable or a little less bad in terms of outflows from exchange traded products backed by holdings of physical gold, but October is looking like another difficult month in already trying year for gold ETFs.
Global holdings in exchange-traded products have fallen to around 2,027 metric tons, around the low from May 2010, compared to the record of 2,768.16 tons at the start of the year, Kitco News reported, citing Barclays data.
Since the start of this month, nearly $974.5 million has been pulled from the SPDR Gold Shares (NYSEArca: GLD), the largest gold ETF and already the worst ETF offender in terms of year-to-date outflows. The iShares Gold Trust (NYSEArca: IAU) has seen October outflows of nearly $210 million.
GLD and IAU are still up nearly 2% since the start of the month, defying gold’s tendency to trade lower in October. Since 1980, October is the worst month for the yellow metal and since the start of this century, October ranks as merely the tenth-best, or third-worst, month in which to own gold. [Fed Fueled Gains Short-Lived for Gold ETFs]
It is estimated that as of October 18, a million ounces of gold has been pulled from ETFs this month.
“Price action seems to be a trigger for ETF outflows. Investors seem to be less interested in holding gold the through ETFs,” Robin Bhar, metals analyst with Societe Generale, said in an interview with Kitco. “ETFs are a good way to get exposure because they are low cost and easy to understand. But if the market has gone cool on gold, then you’re going to see more liquidation.”
Silver ETFs have not been immune to the October outflows theme. For example, the iShares Silver Trust (NYSEArca: SLV) has lost almost $162.3 million in assets since the start of the month. [Silver ETFs Could Shine for Long-Term Investors]
News of October outflows comes after HSBC said last week physical demand from emerging Asian economies eager to flight inflation, such as India and Vietnam, could support gold prices in the coming years. The recent decline in gold prices has helped spur greater demand for gold buyers across Asia as a store of value in light of increasing inflation. [Asia’s Lust for Bullion Could Boost Gold ETFs]
SPDR Gold Shares
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of GLD and SLV.