There's been a lot of talk about the big redemption from the SPDR Gold Trust ETF (GLD) that occurred on February 20. More than $1.06 billion was removed from the fund that day. I'm less interested in one day's worth of selling than I am in a pattern of behavior. And on balance, a lot of money has come out of GLD in the past two weeks, ~5% of AUM. But it's a funny thing about ETF flows. While money has been flowing out of the non-physical gold ETF, one of the real physical gold ETFs, The Market Vectors Gold Miners ETF (GDX), has seen its AUM expand by 3%. Moreover, if we look at the rest of the market since the beginning of the year we'll see that the big loser is not GLD but rather the SPDR S&P 500 ETF (SPY).
Index Universe has a fantastic tool that lets you look at ETF flows between any two dates. It's one of my very favorite research tools. For this analysis I am going to skip the first week of 2013 because a lot of aberrant behavior is noted in many of the bond ETFs as massive draw downs happened all across the maturity curve there. I note, with irony, that not one word of this ever made it onto the front page of Bloomberg or Yahoo! Finance. Gee, I wonder why? Go to the link above and set the time frame for the beginning of January and you'll see what I'm talking about. Bonds (IEI) were sold and emerging markets (EEM) were bought. Huge one-week flows into those ETFs heavily skew the year-to-date results.
For this article I'm more interested in seeing what the trends are after the drama from the fiscal cliff was past. So, looking at the fund flows from January 10, until March 1, makes more sense to get an idea of where money is flowing in this current equity rally.
Top 10 Inflows
Top 10 Outflows
Net Flow mm$
% Change AUM
Net Flow mm$
% Change AUM
Notice anything interesting? I certainly do. The three U.S. equity ETFs have had bigger outflows as a % of assets under management (AUM) than GLD. This is not to say that GLD's data is bullish or anything. It's not, even from a contrarian point of view. But, if it's not bullish for GLD than it certainly isn't bullish for the U.S. equity indices. Let's take this one step farther and note that all types of corporate paper -- HYG, LQD and JNK -- have seen substantial outflows as well.
On the other hand looking at the inflows is also very interesting. A lot of these are very small funds by size and that's what is interesting, a rotation out of large-cap equity and paper and into real estate (IYR) and natural resources (GUNR), low volatility (USMV) and income (VIG). There is a lot of defensive posturing and yield-seeking in the list of top inflows. While overbought asset classes, which have become low-yield, dominate the list of top outflows.
In this case GLD is actually the exception. Given what we know about the rate at which Gold is being accumulated by private investors and central banks, the outflows from GLD could easily be stakeholders looking to take delivery in some way. It's well known that there is an open conduit between the vaults housing GLD's gold - and I'm being generous to the idea that GLD actually has much physical gold backing it -- and those of the COMEX.
Physical off-take on the COMEX in February has been abnormally high, more than 40 tons were served. And as of February 28, there is another 4.6 tons spoken for versus the non-delivery March contract. And since we know that Asian buying has been strong and is looking to increase in the near future, these redemptions from the GLD could be yet another manifestation of physical gold flowing from West to East.
In other words, like most indicators, ETF flows can mean different things to different types of vehicles. If I were heavily exposed to equities, which I'm not, then I would be very worried about these fund flows in conjunction with an insider selling ratio approaching 50:1, according to TrimTabs, real wages after inflation contracting in the face of higher taxes and falling bond yields on European stability worries as we approach the all-time high on the S&P 500.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: I own some physical gold, silver and some baby dairy goats