Now a week removed from the worst sell-off in precious metals markets in more than three decades, one thing is clear.
Gold and silver continues to flow from weak hands to strong hands, primarily from the West to the East, as lower prices have prompted record buying in Asia and the Middle East while U.S. investors in the SPDR Gold Shares ETF (NYSEARCA:GLD) continue to sell the metal.
Those who bought their GLD shares last fall are selling at steep losses.
This appears to be a classic case of not understanding what you own as most institutional investors and money managers who bought GLD late last year probably never really liked the idea of buying gold and, now, they just want out.
Presumably, many bought GLD on the recommendation of investment banks such as Goldman Sachs who, last fall, were predicting further gains for the yellow metal as the next round of Fed money printing got underway.
That didn't work out the way investment banks thought it would.
So, here we are, a full week after the gold price plunged to almost $1,320 an ounce in panic selling and GLD investors continue to sell gold, many of them believing that they're lucky to be able to get out now, at slightly higher prices than last week's lows, making their realized losses a little less painful.
Meanwhile, record demand for the physical metal in Asia continues while gold and silver coins and bars in the U.S. have become scarce as premiums have surged.
To their credit, investors in the worlds' most popular silver ETF - the iShares Silver Trust (NYSEARCA:SLV) - have held firm with less than half of one percent of silver holdings exiting the trust since prices began tumbling ten days ago, but, during that time, nearly 10 percent of the holdings at the GLD trust have left.
Good riddance to the weak-handed GLD investors - your gold is now in stronger hands.
Another 18 tonnes exited the GLD trust yesterday and holdings are now down to 1,104 tonnes, a level last seen in early-2010 (February 4th, 2010 to be exact) as shown below via data from the SPDR Gold Shares website.
Clearly, there have been two kinds of GLD investors in recent years - smart ones and dumb ones.
Those buying GLD just over three years ago were pretty smart as there was a 200+ tonne surge in GLD holdings as the gold price rose from about $1,100 an ounce to $1,200 an ounce. Then, the value of the metal climbed by more than a third to a record high of $1,923 an ounce over the next year or so.
There was another buying surge for GLD shares that occurred late last year as more than 100 tonnes were added to the trust from July through mid-December when things started to unravel.
My guess is that these July to December inflows are now long gone as part of the recent exodus and that these were the weakest of the weak hands.
This buying and subsequent selling clearly wasn't very smart - especially for those who sold in a panic last week in the low-$1,300 an ounce range, apparently not realizing that the "all-in" cost of producing the stuff had almost been reached, meaning that, prices couldn't go much lower for much longer.
All told, nearly 250 tonnes of metal has exited the GLD trust over the last four months and the gold market is surely better off for 100 tonnes of it being gone.
As for the other 150 tonnes, most of those investors booked a profit at some point because the bulk of those purchases were made at much lower prices.
Congratulations are in order.
Whether those sales look as good six months or a year from now as they do today remains to be seen.
Disclosure: I am long GLD, SLV. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. I also own gold and silver coins and bars.