truthingold.com / By truthing / May 6, 2013, 09:05
Want to know which way the price of gold is headed? Some brokers and money managers say you should keep an eye on gold ETFs.
They say the recent collapse in the price of gold has highlighted a new leading indicator for the metal: the flow of money into and out of exchange-traded funds in the sector, led by the giant SPDR Gold Shares.
And some suggest that investors who are thinking of buying into gold-related funds may want to heed the recent past and go with the flows—that is, stay away for now.
“The overall gold market isn’t that big,” says Eric Marshall, portfolio manager at mutual-fund manager Hodges Capital Management. “So creating even a small amount of incremental demand through these ETFs, and making [gold] investible in a way it wasn’t previously, definitely does have an impact on prices. And I think that impact works to the downside just as it did to the upside a few years ago.”
SPDR Gold Shares, with a recent $50 billion in assets, has contributed a significant portion of overall gold demand in recent years. The World Gold Council, the trade group of gold miners that sponsors the fund for marketing agent State Street Global Advisors, estimates that about $236 billion of gold was purchased in 2012. It says roughly 6% of that demand came from ETFs, of which SPDR Gold Shares is by far the largest. (The next largest, iShares Gold Trust, has assets of about $10 billion.)
Near the height of the gold bull market, in 2009 and 2010, ETFs accounted for roughly 13% of gold demand, according to the council.