Hedge funds’ bullish bets on gold jump to four-year high
Hedge funds and other large speculators boosted their net-long position in gold.
Once the largest fund of its kind in the world, top physical gold-backed exchange traded fund – SPDR Gold Shares (NYSEARCA: GLD) – has dropped out of the top ten.
According to ETF.com GLD suffered outflows of $902 million or 3% of its total assets under management during May.
That compares to total inflows in US-listed ETFs – dominated by US and international equity funds – in May of more than $12 billion and the year to date total if $84 billion.
GLD still dwarfs other physically-backed exchange traded gold products holding 44.5% of the global total at 709.9 tonnes or 22.8m ounces worth $26.8 billion.
First quarter data from the US Securities and Equities Commission (SEC) of major asset management companies’ holdings showed GLD’s long-time top investor remains US billionaire John Paulson’s hedge fund with a holding worth roughly $1.2 billion.
Canadian asset manager CI Investments purchased 6,117,900 shares worth $703.6 million during the first three months of the year, becoming the second largest holder of bullion in the fund with total holdings of $735 million.
Total holdings of the dozens of gold-backed ETFs traded around the world has also fallen back, declining to 1,593.4 tonnes this week the lowest since March 2009.
Number one for a day (or two)
Gold ETFs were credited for a big portion of gold’s uninterrupted 12-year bull run, because ETFs make it so easy to invest in the yellow metal. (And to cash out as gold’s 2013 annus horribilis so clearly showed.)
While launched a full 18 months after the first physically backed gold ETF was created in Australia, GLD quickly dominated the market.
GLD was listed on 18 November 2004 and enjoyed a pretty good first day. Investors bought just over 8 tonnes or 260,000 ounces of gold affording the fund a net asset value of $115 million.
A mere two days later it would cross the $1 billion mark and by the time Thanksgiving arrived the following week gold bugs had snapped up more than 100 tonnes. The 1,000 tonne market would be crossed in February 2009.
On August 22, 2011 when gold was hitting record highs above $1,900 an ounce GLD became the largest ETF in the world briefly surpassing the venerable SPDR S&P 500 trust (assets end-May equal $177 billion) at a net asset value of $77.5 billion.
Gold holdings in the trust would peak more than a year later in December 2012 at 1,353 tonnes or 43.5 million ounces, representing half the ETF gold held around the world.
Global ETFs hit a record 2,632 tonnes or 93 million ounces of gold at the time.
All of that came crashing down in 2013 as the gold price plummeted and investors pulled 552 tonnes from the fund. The extent of the panic was evident by the fact that GLD had only 17 days of inflows during the entire year.
After a few false dawns in 2014 GLD recored a second year of net redemptions. At 710 tonnes GLD’s vaults are now as empty as they were September 2008, when the collapse of Lehman Brothers sparked a global financial meltdown.
Nevertheless, those who got in on the GLD ground floor are still enjoying returns in excess of 150%. It’s also double the returns if you put your money into the S&P 500 in November 2004.
Image by beckycaplice
