Gold ETF Holdings

Gold holdings in Exchange Traded Funds (ETFs), after falling nearly 40% since early 2013 are increasing again.

Despite declining holdings, Gold held in ETFs remains a far more popular way to invest in gold than buying physical bullion.

While Gold ETF holdings are massive, physical gold deliveries on the Shanghai Gold Exchange are much larger.

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Gold ETF Holdings

(updated daily)

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The Rise and Fall (and rise again?) of Gold ETFs

Gold ETFs have made investing in gold easy. They became wildly popular in the gold bull run from 2006-2011 as convenient way to buy gold. Gold ETFs have also changed the way people view gold. We have long argued that gold is an assest not an investment. Gold is insurance against currency debasements and economic uncertainty. Gold is an asset to be held long term, not traded in a stock account.

Just as you hold your insurance policy, you don’t trade it, the same is true for gold.

Gold ETFs, however, have turned gold into a trade for retail investors, causing many to buy gold ETF shares for the wrong reason – price appreciation.

Most gold ETFs don’t allow physical delivery for retail investors, rather they provide exposure only to the price of gold. Under gold ETF schemes, holders don’t own gold, they own interests in shares representing gold. If the stock market closes, investors do not have access to their gold ETF shares.

This, however, doesn’t seem to concern the vast majority of American who are content with paper or digital assets.

Gold, via ETFs (and Comex trading) has been transformed into another class of paper/digital assets.

As we noted in “The Importance of Gold to Countries and Individuals“, Americans generally don’t care about or buy much gold, at least not in physical form. In the U.S., sales of American Gold Eagles are nearly non existent* compared to gold demand in China as evidenced by the amount of physical gold delivered on the Shanghai Gold Exchange.

American Gold Eagle Sales vs. Gold Delivered on the Shanghai Gold Exchange

The total weight of all American Gold Eagles sold in 2014 was more than 12X less than the amount of gold delivered on the Shanghai Gold Exchange in the first three weeks of January 2015.

No Shortage of Physical Gold Buying and Storing Options in the United States

Physical gold can be bought and stored in allocated insured vaulted accounts all over the world through companies such as JM Bullion LLC, Gold Broker, Gold Core, goldandsilver.com, Apmex, Blanchard Gold and Schiff Gold. While these options exist, the amount of gold sold via this method does not come anywhere near to the amount of gold “sold” via ETFs.

The American Gold Eagle coin, produced by the U.S. Mint is the best selling gold coin in the world and can be used to fund IRAs.

Sales of American Gold Eagle coins were down 44% in 2014 from 2013.

Sales of American gold eagles, like gold holdings in ETFS have declined along with the price of gold during the past few years. American Gold Eagle coins, however, did not experience the same massive increase in demand that ETFs had from 2006-2012. (see chart below)

Comex Gold Deliveries vs. Gold Delivered on the Shanghai Gold Exchange

While the volume of gold long and short contracts on Comex is immense, only a very small portion of those contracts result in actual physical delivery of gold.

The Shanghai Gold Exchange delivered far in excess of twenty times more gold than Comex in 2014.

Gold ETFs

The bulk of U.S. retail gold demand comes from gold ETFs, the largest of which is GLD. Gold ETFs have supplanted demand for physical gold in the west.

Top Gold ETFs and Close Ended Funds

GLD is by far the largest gold ETF in the world.

Some commentators claim Gold ETFs have assisted in the manipulation of gold as they provide access to large amounts of physical gold to bullion banks who act as custodians to the largest gold ETFs. The custodian of the largest gold ETF, SPDR’s Gold Shares (GLD) is bullion bank HSBC Bank plc. The custodian of the second largest gold ETF, ishares Gold (IAU) is JPMorgan Chase.

Bullion banks are among the largest gold traders on Comex. With massive amounts of gold under their control the potential for gold leasing from the ETFs exists.

Gold Held in ETFs vs. Gold Delivered on the Shanghai Gold Exchange

While ETFs have managed to scoop up large amounts of physical gold bullion by shifting investor demand away from physical delivery, gold in ETFS is dwarfed by the amount of gold delivered last year on the Shanghai Gold Exchange.

Gold held in the ETF GLD doesn’t come close to the amount of gold delivered in one year on the Shanghai Gold Exchange.

American Gold Eagle Sales vs. GLD Holdings

Sales of American Gold Eagles over the time period that GLD has been in existence (2004-2015) are 67% lower than the amount of gold held in GLD. At its peak in 2013, GLD had over 1,000 tons of gold.

Sales of American Gold Eagle coins since 2004 are more than 2/3 less the current gold holdings of GLD.

Gold ETF Holdings 2010-2015

Gold held in ETFs has been on a steady decline since early 2013. In recent months, however, holdings have ticked up.

Gold ETF holdings have declined until recently.

Gold ETF Holdings 1994-2015

In this chart you can see the sharp rise in gold ETF holdings from 2005-2013 and decline since then, until recently.

Total holdings of all major gold ETFs and other gold custodial faciities from 1994-2015.

Updated March 30, 2016

Gold ETF inflows rose sharply in the first quarter of 2016.

Next up: Silver ETFs.