Redemptions In The GLD Are Bullish For Gold

Recent outflows from physical gold exchange traded products (we use the SPDR Gold Shares, GLD) have been interpreted by the financial press as a sign of weakness in the demand for gold as an investment vehicle.

However, a closer look at the evidence suggests otherwise: the largest outflows in the history of the GLD (see Figure 1) started well before the large drop in the price of gold we observed on April 15th, 2013 (-9%, which represents a 1 in 11 years event). In fact, the net redemption of shares of GLD started as early as the second week of January 2013 (on a 3-month cumulative rolling basis). In this note, we will explore the theory that it was the shortage of physical gold and the ensuing arbitrage opportunity that drove market participants to redeem shares of GLD.

So why are the bullion banks that act as Authorized Participants for GLD, a group that includes JP Morgan and HSBC and others (who by-the-way were mostly bearish on gold leading to the April Crash), redeeming so many shares of GLD? Read more >>

GLD now holds more than $50bn in physical gold

Image via CrunchBase

Lawrence Williams
LONDON -

State Street Global Advisors, and World Gold Trust Services, a wholly-owned subsidiary of the World Gold Council (WGC), have announced that assets in the world' largest gold ETF, the SPDRGold Trust (NYSE Arca: GLD) have surpassed US $50 billion as nervous investors have continued to put their trust in gold as they see the global economic situation possibly deteriorating further. Fears of a double dip recession, which now seems more and more likely, have been driving some really big money into the gold ETF.

"With assets having increased by approximately 32 percent year-to-date (as of Friday, June 25, 2010), SPDR Gold Shares has radically transformed the way in which a wide range of investors access the gold market," said James Ross, senior managing director at State Street Global Advisors. "GLD is increasingly being used as part of a long-term diversification investment strategy within investors' portfolios in a variety of market cycles currently playing out worldwide."

Jason Toussaint, managing director, Investments, World Gold Trust Services, LLC commented: "Strategic asset allocation will continue to play a central role in investors' portfolio performance moving forward, and portfolios that contain even a small allocation in gold have the potential to better cope with varying market scenarios. This milestone for GLD underscores that investors have embraced gold as a viable core holding over the long-term." More...