The world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Shares , saw an outflow of over $1 billion of metal last month as investors lightened holdings in anticipation of a further price drop from current four-year lows.
Data from the GLD fund showed on Monday that its holdings slid to their lowest in six years after an outflow of 28.7 tonnes in October, their biggest of any month this year.
Over the course of the month, gold prices also fell to their lowest since early 2010 at $1,161.25 an ounce.
“Last month we saw two sharp moves down, and that will make people think a little bit more before they buy, because of the possibility that the market could move against them again,” Mitsui Precious Metals analyst David Jollie said.
“It could be quite concerning if ETF outflows strengthen, first of all because it sends metal into the market, and also because it sends a message that is interpreted as bearish,” he said.
“There is a self-reinforcing nature to these flows, and if they become substantial, in time that will become a bearish factor for gold.”
Gold ETFs, which issue securities backed by physical metal, are designed for investors seeking exposure to the gold price without taking delivery of the bullion itself.
They proved popular with investors during the financial crisis that followed the collapse of Lehman Brothers in 2008.
The GLD fund, launched in 2004, saw its holdings hit a record 1,353.3 tonnes in late 2012. A sharp drop in the gold price the following year prompted investors to liquidate heavily, however, leading to outflows of 550 tonnes.
Selling eased off in early 2014, but has shown signs of resuming as prices lost traction in the second half of the year.
Total holdings of the GLD have now fallen to just 741 tonnes, their lowest since September 2008.
Their retreat picked up speed in late October. Gold slumped to its lowest since mid-2010 on Friday, hurt by a surge in the dollar and expectations that the Federal Reserve will act before other central banks to tighten monetary policy.
Selling from gold-backed ETFs is adding to that pressure, analysts said.
“The market is clearly on the defensive and we have not seen enough emerging market demand come through yet to stabilise prices,” HSBC analyst Jim Steel said.
“As long as there are outflows from ETFs, and we see liquidation in other parts of the market, the market is going to stay on the defensive.”
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