Gold ETFs Recover 4% in Week Despite ‘Heavy Disinvestment’

ETF Trends

SPDR Gold Shares (GLD) was on track for a gain of 4% this week to recover some of the steep losses the fund suffered the previous three weeks, although investors continue to pull cash from bullion-backed ETFs.

Gold prices were set for the biggest weekly gain in a year.

“Sentiment, though buoyed, was still on an unsure footing with investors in exchange-traded funds heading for the exit, highlighted by further fund outflows on potential central bank sales and uncertainty over U.S. monetary stimulus,” Reuters reports.

Bullion holdings in GLD are at their lowest levels since September 2009. The ETF holds about 1,090 metric tons of gold valued at $51.6 billion. GLD has experienced net outflows of $12.8 billion year to date, according to IndexUniverse data.

“Heavy disinvestment from ETF investors is being offset by strong physical demand in key markets such as India and China, but neither of these is likely to continue indefinitely, and which runs its course first could determine whether the (gold) price moves $100/oz higher or lower,” Macquarie analysts said in the Reuters story.

Turning to the major U.S. stock indices, the S&P 500 was poised for a 1.8% weekly gain in afternoon trade Friday while the Dow added 1.2% and the Nasdaq Composite climbed 2.3%.

“The GDP number does show that the U.S. economy is still in a slow-growth mode, albeit slightly below expectations,” Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, told Bloomberg News. “I still like the risk reward for equities but it’s a ride the highs, buy the dips market. The market’s a little ahead of itself and frankly we’re due for a pause.”

The top three unleveraged ETFs this week were Guggenheim Global Solar Energy (TAN), Market Vectors Solar Energy (KWT) and iShares DJ US Home Construction (ITB) with gains of at least 9%.

The bottom three unleveraged ETFs this week were U.S. Natural Gas (UNG), iPath Coffee (JO) and iPath Seasonal Natural Gas (DCNG) with setbacks of 5% or more.

In next week’s economic data, look for reports on personal income and spending, pending home sales, S&P Case-Shiller home prices and consumer confidence. Also, investors will get the Federal Reserve announcement on Wednesday and the April jobs report crosses on Friday.

Full disclosure: Tom Lydon’s clients own GLD.

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