By Sumit Roy
The ETF selling isn't over yet.
Gold ETF Holdings
After stabilizing for several weeks, gold exchange-traded fund holdings are back on the decline.
Liquidation by ETF investors has been a large factor in this year's 24 percent plunge in gold prices. Thus, when ETF holdings stopped falling in August and September, we wondered whether the worst of the selling was behind us.
But while selling has certainly slowed down from the torrid pace of earlier this year, it's clear that ETFs remain a net drag on gold demand, and in fact continue to add supply to the market.
Since the start of the year, ETF liquidation has totaled 23.33 million troy ounces-a reduction of 28 percent.
We've opined that if gold loses its appeal to the investing masses, ETF holdings could fall even more significantly from here. A trip back to 2008 levels would result in liquidation of another 30 million troy ounces, which would obviously be bearish for prices.
On the flip side, a bullish catalyst such as an uptick in inflation could reignite investors' appetite for gold ETFs and boost prices.