The World's Largest Gold Fund Is Going Through Its Longest Dry Spell On Record
The last time the SPDR Gold Shares exchange-traded fund (GLD) received an inflow was the day after President-elect Donald Trump won the presidential election.
The fund, which goes by the symbol GLD and is far and away the world's largest commodity ETF with more than $31 billion in assets, has seen nearly $5.7 billion in outflows since receiving a net inflow of $220 million on Nov. 9.
This 43-session streak is the longest stretch without an inflow for GLD since its inception in 2004, surpassing previous record spans of 42 from October to December 2015 and June to August 2013.
"GLD is primarily used by institutional investors as much as a trading vehicle as a long-term investment strategy, so when it's in favor it can really be in favor, and when it's not demand can dry up quickly," said Todd Rosenbluth, director of ETF research at CFRA. "I do think it's surprising because we've started 2017 with investors being more concerned about equities, and rates have pulled back, which should be more favorable to commodities and alternatives-based strategies."
The Republican nominee's victory in November was supposedly a gold-positive event, but has turned out to be anything but. The rise in real U.S. Treasury yields following the election helped send bullion below $1,150 per ounce by year-end. A hard asset with a yield of zero (like gold) should be affected by the real yield on risk-free assets, which effectively determine the opportunity cost of holding bullion.
Even though five-year Treasury Inflation-Protected Securities yields have declined in recent weeks, sitting closer to pre-election levels than their post-election peak, the precious metal has still failed to break above $1,200 per ounce as of 8:00am in New York.
To have a streak this long for an ETF this size is "definitely unusual, and extra unusual because of the rally in gold since mid-December," said Eric Balchunas, ETF analyst at Bloomberg Intelligence. "I'm shocked that there haven't been any inflows since then."
Gold-backed exchange-traded funds listed outside the U.S., however, are having more luck attracting funds over the past month. German-based XetraGold, for instance, has seen almost $172 million in inflows year to date.
Rosenbluth added that a higher degree of fear and uncertainty in Europe and other markets entail that risk-off strategies may have more appeal abroad than in the U.S.
This piece has been updated to correct the inception date for GLD.