ETF Impact On Gold Prices (ETFs: GLD, IAU, DBC)

Includes: DBC, GLD, IAU
by: Roger Nusbaum

Roger Nusbaum submits: Recently I had a question come in about whether demand created for gold by the ETFs (GLD, IAU) could have been behind the recent move up in the spot price. This subject has come up before on this blog and clearly this has played a role.

If there were no ETFs there would be far fewer people with direct access to gold. That GLD and IAU exist at all creates a demand that I believe would not otherwise exist. I found this table through one of my RSS feeds:

The tonnes owned by GLD and IAU adds up to 285. There are also gold ETFs in the other countries on the table. Incidently, I know that the UK and Australia had gold ETFs before the US did, but I am not sure about South Africa.

I think that as more ETFs for other commodities get created we will see demand distortions there as well. The effect created could be big price increases for things like oil, copper, silver and some of the soft commodities that will be included in the Deutsche Bank ETF (DBC).

I realize that all of these have had big moves already. While there is no way to know for sure, I don’t think these markets can price in a future buying demand of this sort.

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