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ETFs Shed 300 Tons Of Gold Bullion So Far In 2013

May 22, 2013 - Exchange-traded funds holding gold bullion, such as SPDR Gold Trust (NYSE: GLD), have shed over 300 tons of gold so far this year, according to ETF analyst Tom Lydon. “Central banks maybe aren’t as concerned,” Lydon said when asked why gold is down. “I think the average investor, with stocks and bonds doing so well, I think they say, ‘hey, I don’t need to hedge, so that gold position I had, I’m going to put that into stocks for now.’” Lydon said that the disposal of about 600,000 pounds of gold bullion by ETFs this year was “amazing” and “incredible." Other analysts have given explanations that are similar yet not exactly the same, and definitely not as enthusiastic.

“I think the average investor is still worried about inflation and the dollar’s purchasing power," said Gold Coin analyst Robert May. “Central banks might have fooled the institutions, or maybe the central banks are fooling themselves, but household investors are still safety-oriented and that’s why they are shifting away from ETFs, not back into traditional investment vehicles, but into physical gold."

If the trend of dumping ETFs stays intact, the gold spot price could fall as low as $1300 an ounce, according to May. “It’s highly unlikely, but given the fact that the volume of ETF markets is so much larger than that of the physical gold market leads me to believe that despite heavy physical buying, the gold spot price could fall before the market finds a balance and is readjusted. At that point, there is no telling how high gold could go,” May added.

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Jonathan Monroe

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