Gold ETF bullion holdings fall, seen bearish
By Frank Tang
NEW YORK, May 18 (Reuters) - StreetTRACKS gold shares GLD.N, the world's largest gold-backed exchange traded fund (ETF), said on Friday it has dropped a substantial amount of bullion holdings over the last two days, signaling reduced exposure by investors due to weaker prices.
Analysts cautioned that a continued outflow could be an indication that further liquidation in the gold market might be on its way.
Bullion held by StreetTRACKS fell 16.6 tonnes, or more than 3 percent, to Thursday's 469.15 tonnes, which marked the level last seen in mid-February, compared with 485.8 tonnes on Tuesday.
StreetTRACKS accounted for more than 80 percent of the metal held by all such funds.
ETFs are listed on stock exchanges and offer investors exposure in the underlying commodity without taking physical delivery. Sponsors of such funds buy a matching amount of the commodity and keep it in bank vaults.
The decline came after the bullion ETF saw its metal holding peaked at a record 500.7 tonnes just on April 19.
For details on ETFs, double click on XAUEXT-NYS-TT.
John Reade, head of precious metals strategy at UBS, said in a note that the extent of the sell-off was surprising as most ETF fund holders were seen as longer-term, "buy and hold" investors.
According to Reade, gold held by all the five bullion ETFs that he monitored fell more in the last month than at any time in the past three years, but a sharp sell-off was only confined to StreeTracks among the five funds.
Reade estimated that 70 percent of StreetTRACKS was held by private investors. "Any sign of continued redemption of the StreetTRACKS would make us look at this in more detail."
Spot gold XAU= traded at $660 an ounce on Friday. This week, prices dropped as much as nearly 3 percent on liquidation by funds and technical chart-based sales. Analysts and dealers also cited selling pressure from the ETF outflow.
Jon Nadler, analyst at Kitco Bullion Dealers, said that gold fund liquidation could be an early sign of a price weakness.
Nadler said that bullion ETFs had been the catalyst to higher prices in the previous months, and investors should keep an eye on further liquidation by fund holders because of their sizable holdings.
