A $640M outflow of capital from the GLD ETF fund

digitalgoldcoin (51)in #gold • 2 years ago

The short-term pullback of the gold price was accompanied by a significant outflow of capital out of the world's largest ETF fund, SPDR Gold Shares (GLD).

As expected, the Fed raised the US interest rate by 50 base points. During the press conference that followed, Chairman Jerome Powell said that more interest hikes were coming, though he excluded an increase by more than 50 points. This was followed by a short-lived stock market rally; the price of gold also increased, while the exchange rate of the US dollar dropped by as much as 1%.

While the price of gold was relatively low, investors withdrew some money from the biggest ETF fund for the first time. The gold reserves of SPDR Gold Shares (GLD) dropped by 6.68 tons to 1089.04 tons as of May 4. A total of $640 worth of capital left the fund.

Meanwhile, the shares of the silver ETF iShares Silver Trust (SLV) also dropped, just as the reserves went down by 35.24 tons to 17,943.61 tons of silver. It's worth remembering that SLV is the biggest silver ETF in the world and that its operator must have one ounce of silver to back each share, which in GLD is equivalent to 1/10 of an ounce.

In the past, whenever the prices of gold and silver rose, the reserves in their ETFs also increased. However, the funds seem to catch up rather than lead the gold and silver price rise. This is because institutional investors gain exposure to precious metals through 'paper gold' (ETFs) in order to capitalize on the short-term growth.

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