Gold ETP (exchange traded product) are in the midst of a large shakeup in history, as reported holdings are diminishing at a tremendous pace. A total of 174 tons were taken off in April signaling the biggest drop ever in these financial products’ brief history. Gold ETPs now hold 2275 tons, a level that puts it on par with October 2011. $10 billion worth of gold being taken out in the first quarter is definitely big news, but whether it is of the bearish tone that some analysts are making out to be is another matter.
The SPDR GLD ETF, the largest gold ETF in the world, now holds 1078 tons which is down 20% from the beginning of the year. Yet if we look at the largest silver ETF in SLV, then we witness an increase of 3% YTD. So why the big disparity between these two precious metals?
We have to remember that for every one who’s selling, there must be a buyer on the other side. Is it possible that these paper gold ETF holdings are being redeemed and collected because physical gold is in more demand right now. Is it possible that some big investors have decided that they prefer to hold physical gold and have gotten rid of their paper position as a result? Definitive answers to those questions are not available, but they certainly deserve a thought.
If one day these gold ETP diminish to the point that they no longer exist – what would be the effect on the gold market? The answers and outlook all depends on perspective, whether you really believe gold to be a relevant asset in these modern financial times, and for those who do – paper gold backers moving to physical can only result in one thing, prices going up.