Gold ETFs aren’t seeing investors flee the products even though the precious metal’s price has pulled back following last year’s record-breaking rally over $1,900 an ounce.
“Investors in gold exchange traded funds are living up to their reputation for ‘stickiness’ as they have stuck with their holdings even as the price of bullion has retreated after hitting an all-time high in September 2011,” reports Chris Flood at the Financial Times on Thursday.
Gold ETF flows are seen as a more reliable indicator of long-term investment demand for the metal, rather than a gauge for short-term sentiment.
Gold holdings in global bullion-backed ETFs total about 2,400 metric tons, close to a record.
“Global ETF investor positions have continued to trend up in both gold and silver, reflecting the fact that long term price supports such as negative real interest rates, currency debasement and sovereign/financial sector default risk,” ETF Securities noted in a recent paper. [Measuring the Impact of Gold ETFs]
Gold’s sharp pullback in 2011 didn’t lead to investors abandoning ship. [Gold ETF Investors Say Pullback is ‘Excessive’]
Analysts have been surprised by the lack of selling interest in ETFs considering weak gold prices, according to the FT article.
Investors’ resilience suggests most in the gold ETFs have a long-term bullish outlook.
“Suki Cooper, precious metals analyst at Barclays says there has been ‘remarkably little’ selling from gold ETPs but she cautions that if these longer-term sticky investors turn more negative, gold prices could be susceptible to a much deeper correction,” the FT reported.
SPDR Gold Shares (NYSEArca: GLD)
Full disclosure: Tom Lydon’s clients own GLD.