Gold ETF Outflows Persist After Fed

Includes: GLD, IAU, SGOL
by: Tom Lydon

Gold ETFs fell and outflows continued Wednesday after the Federal Reserve said it could either increase or scale back its bond purchases.

In April, bullion holdings in gold ETFs fell by 174 metric tons, a record, according to Bloomberg News.

Gold exchange traded product assets were 2,275.84 tons on Tuesday, the lowest since October 2011, according to data compiled by Bloomberg. SPDR Gold Shares (NYSEARCA:GLD) holdings, the biggest ETP, dropped to 1,078.54 tons, the lowest since September 2009.

"When you get an ETF market that doesn't yield as high as comparable assets, then you will have continual topside pressure," said Jonathan Barratt, the chief executive officer of Barratt's Bulletin, a commodity newsletter, in the report. "People are moving funds from non-yielding to yielding assets."

There has been strong demand for gold coins after the sell-off despite the ETF outflows.

"It's been primarily the financial component that has been selling. I don't think that we have seen a lot of small holders changing their view on gold," said Nicholas Johnson, a portfolio manager who helps manage the $30 billion in commodities at PIMCO, in a separate report.

Sales of's American Eagle gold coins are at their highest selling rate since late 2009, despite the steady outflows seen in bullion ETFs, reports Frank Tang for Reuters. Analysts are expecting an Asian buying spike on the dips and central bank demand to remain steady.

Brendan Conway for Barron's reports that the type of investor who buys gold in financial markets is different from the type who would purchase coins. Institutional investors and hedge funds are typically liquidating positions in ETFs, with the exception of a few retail investors.

Individual investors are still buying up gold bars and coins to keep physical assets in gold without the risk of losing capital. In 2013, sales of gold coins grew to 502,000 ounces from 116,200 ounces from one year ago, during the same time period.

The gold coin craze is taking place across borders, with Great Britain and Australia experiencing record sales.

Other physically-back gold ETFs include:

  • iShares Gold Trust (NYSEARCA:IAU)
  • ETFS Physical Swiss Gold Shares ETF (NYSEARCA:SGOL)

SPDR Gold Shares

Click to enlarge

Tisha Guerrero contributed to this article.

Full disclosure: Tom Lydon's clients own GLD.

Disclosure: I am long GLD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.