“Analysts generally say it’s difficult to quantify the effect of funds that hold bullion on the price of gold, but agree that the growth of their holdings has helped fuel the surge in the metal’s price in recent years,” The Wall Street Journal reported earlier this year. “And that suggests that a drop in those holdings could contribute to a decline in the price of gold, which already is well below its recent peak.”
However, the relationship between ETF holdings and the price of gold isn’t clear-cut and may not be a reliable indicator for short-term moves. [Measuring the Impact of Gold ETFs]
The World Gold Council reported that gold demand from ETFs fell to 154 metric tons last year from 367.7 in 2010. [Gold ETF Demand Fell 58% in 2011]
SPDR Gold Shares
Full disclosure: Tom Lydon’s clients own GLD.