For the first time since February 18th, the holdings at the SPDR Gold Shares ETF (GLD) held steady yesterday at 1,244.86 tonnes. This ends the longest string of consecutive daily outflows since the fund was launched back in late-2004, surpassing the previous record of just 5 days set in May 2011.
More importantly, the cumulative 11-day outflow of 78.1 tonnes smashes the old record of 64.6 tonnes in August 2011, just as the gold price was reaching an all-time high of over $1,920 an ounce as shown below.
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From the record high of 1,353 tonnes set just three months ago in anticipation of the latest round of Federal Reserve money printing, some 108 tonnes have flowed out of the GLD trust, almost 8 percent of the December record total.
In dollar terms, this is a pile of gold bars worth about $5.5 billion at today's prices. In the scheme of things, GLD flows are really just an indication of U.S. investor sentiment toward gold as there is little correlation between the holdings of the world's largest gold fund and the gold price.
This was detailed in "Are Record Outflows From The SPDR Gold ETF Cause For Concern?" not long ago where it was revealed that the relatively strong correlation between the two early on has broken down in recent years. This can be seen clearly below from mid-2010 to mid-2011 where GLD holdings fell as the gold price rose from under $1,000 an ounce to $1,300 an ounce. Then, the ETF added little gold as the price soared to a record high later in 2011.
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In fact, the outflows from the high of 1,320 tonnes in June 2010 to the May 2011 low of 1,191 tonnes actually exceeded the 108 tonne outflow seen in recent months. All of this makes a convincing case that ETF flows really aren't that important, however, that hasn't stopped a number of investment banks from citing this development as key driver of recent downgrades for their gold price forecasts.
Whether this marks the end of the selling for GLD is anyone's guess, however, U.S. investors have clearly lost what little passion they had for the yellow metal as equity markets have risen. There's been much ado about the Dow-to-gold ratio climbing back up above nine for the first time in more than two years and, since U.S. investors never really did warm up to gold as an investment, it's no big surprise that GLD holdings are tumbling as stock prices are soaring.
The rest of the world clearly doesn't share this view and, as has been the case for most of the secular gold bull market, they are the ones who will set the price of the metal over the long-term. Futures traders, many of them in the U.S., will push the gold price up or day from day to day, but it is physical demand coming from outside the U.S. that will ultimately determine gold prices.
Of course, someday, U.S. investors might really take a shine to the metal and that would be a key driver in bringing the long-term gold market to a conclusion - at much higher prices. But, at the moment, emerging market central banks continue to buy what U.S. investors are selling as South Korea bought 20 tonnes of gold last month and Russia added more than 12 tonnes.
Gold continues to flow from West to East and that trend is not likely to change anytime soon. As noted in "Why Current Fed Money Printing Will Lead To Higher Gold And Silver Prices," the other day and as suggested by Morgan Stanley analysts earlier in the week, the gold market is clearly in a transition phase of some sort.
My guess is that the transition is from a sanguine view about inflation to a steadily growing concern over rising prices in the months ahead as the Fed continues to print money. Another guess that can be offered up at this time is that U.S. investors who have sold their GLD shares in recent months will someday regret that decision.
Disclosure: I am long GLD. I also own gold coins.
