Gold price ahead of the Thanksgiving weekend
During this period, gold is usually just before forming a short-term top and starting the biggest decline within the final quarter of the year.
Once the largest fund of its kind in the world, top physical gold-backed exchange traded fund – SPDR Gold Shares (NYSEARCA: GLD) – is having a rip-roaring first half of 2016.
After suffering through three years of a declining gold price and investors liquidating positions built up during the metal’s bull run, this year the fund’s assets under management have swelled by $18.5 billion year to date.
GLD dwarfs other physically-backed exchange traded gold products holding 48.8% of the global total as of today at 950 tonnes or 30.5m ounces worth $40.3 billion. GLD’s holdings have shot up by 308 tonnes this year to the highest since July 2013.
The rise in assets under management in 2016 is a better performance than the banner years of 2009 and 2010 when investors caught in the global financial crisis and spooked by quantitative easing piled into GLD.
Stripping out the appreciation in the gold price, 2016 inflows into GLD is over $10 billion also surpassing 2009’s tally. Investors actually pulled money out of GLD in 2011 although assets under management grew as a result of the peaking gold price.
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.
On August 22, 2011 when gold was hitting record highs above $1,900 GLD became the largest ETF in the world briefly surpassing the venerable SPDR S&P 500 trust
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 today $174 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. 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.
Nevertheless, those who got in on the GLD ground floor are still enjoying returns 135%. If you put your money into the S&P 500 in November 2004 you’d be worth 77% more today.
Comments
Sierra_Intrepid
“Once the largest fund of its kind in the world, top physical gold-backed exchange traded fund – SPDR Gold Shares (NYSEARCA: GLD)”
This is highly questionable. Paper gold GLD claims to be fully backed by physical gold bullion but yet it refuses to give retail investors the right to redeem for any of these ‘claimed’ gold bullion. This fact alone would mean GLD shares are nothing more than paper at the end of the day. Furthermore, GLD’s prospectus is chalk full of weasel clauses and legal loopholes that allows the fund to get away without the full physical gold backing. One good example of this is the clause that states GLD has no right to audit subcustodial gold holdings. To this day, I have not heard of a single good reason for the existence of this audit loophole. I’ve also verified the following to be true and welcome everyone else to do so:
“Did anyone try calling the GLD hotline at (866) 320 4053 in search of numerical details on GLD’s insurance? The prospectus vaguely states “The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody.” When I asked about how much of the gold was insured, the representative proceeded to act as if he didn’t know and said they were just the “marketing agent” for GLD. What kind of marketing agent would not know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors.
I remember there was a well documented visit by CNBC’s Bob Pisani to GLD’s gold vault. This visit was organized by GLD’s management to prove the existence of GLD’s gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on the most recent bar list at that time. It was later discovered that this “GLD” bar was actually owned by ETF Securities.”