Nearly 180 metric tons of bullion flowed out of gold ETFs in the first quarter as notable investors including George Soros dumped their positions in SPDR Gold Shares (NYSEArca: GLD) and other precious metal funds amid a pullback in prices.
The first quarter saw a “strong resurgence” in demand for gold jewellery, bars and coins; however, overall demand was down 13%, according to a report released Thursday from the World Gold Council.
“Outfows from ETFs accounted for the vast bulk of this decline; excluding these outflows overall demand grew year-on-year,” it said.
Also, SEC filings Wednesday revealed that Soros Fund Management LLC lowered its investment in GLD, the largest gold ETF, by 12% in the first quarter to 530,900 shares, Bloomberg reports.
The correction in gold prices has erased $42 billion in value from gold exchange traded products, according to the report. Assets in GLD have dropped 22%.
In terms of performance, GLD was down about 17% year to date through Wednesday’s close. Other gold ETFs include iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL).
Deutsche Bank analysts predict that gold ETFs could shed an additional 250 metric tons of bullion due to investor redemptions. [Gold ETFs Set for More Outflows]
Gold held by bullion-backed ETFs, which in 2012 accounted for 6% of the world’s gold demand, fell by 177 metric tons in the first quarter, according to the World Gold Council.
Gold-backed ETFs “have seen some holders, primarily in the U.S., collect profits and move into equities,” said Marcus Grubb, a managing director at the WGC. While gold ETF holdings are down, this has been balanced by investment in bars in coins, which increased 10% in the first quarter from the year-ago period, he added.
“We’re still seeing ETF liquidation. It’s driving prices down,” said Jim Steel at HSBC in a Financial Times story. Gold futures were trading below $1,400 an ounce on Thursday.
SPDR Gold Shares
Full disclosure: Tom Lydon’s clients own GLD.