The world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust (GLD), said its holdings fell 21.7 tonnes or 1.9 percent in January, against a rise of 63.36 tonnes or 8.1 percent in the same month of 2009.
Data showed the trust, which issues securities backed by physical stocks of gold, held 1,111.922 tonnes of bullion on Friday, the last trading day of January, against 1,133.622 tonnes on Dec. 31.
The SPDR fund saw record inflows in the first quarter of 2009 as fears over the outlook for the financial sector fuelled buying of the metal as a safe haven. The fund is the world’s number six gold holder, ahead of Switzerland, China and Japan.
Analysts fear sustained outflows from gold ETFs if investors’ attitude towards bullion sours, which could prove a drag on prices.
“Gold and silver investment demand has waned since the end of 2009, particularly as the U.S. dollar rebounded versus the euro,” said BNP Paribas analyst Anne-Laure Tremblay. “In this context, most ETFs saw net outflows in January.”
“Going forward, we expect gold to trend lower until the third quarter of 2010, and as a result, net investment demand generally for precious metals — and therefore inflows into ETFs and exchange traded futures — should be more subdued than at the same time last year,” she said.
The largest silver-backed fund, the iShares Silver Trust (SLV), saw a 107.99-tonne or 1.1 percent decline in its holdings last month, versus a rise of more than 660 tonnes or 9.7 percent in January 2009.
The decline in New York gold and silver ETF holdings has been accompanied by hefty inflows into new platinum and palladium funds launched in January by a U.S. unit of London’s ETF Securities.
Data showed the funds’ platinum holdings had risen to 244,941 ounces by Friday, while its palladium fund held 399,925 ounces of metal.
“The success of the U.S.-listed platinum group metals ETFs is mopping up supply,” said HSBC analyst Jim Steel in a note.
Exchange-traded funds give investors exposure to an underlying asset price without having to buy and store the asset themselves. They have proved a popular way to invest in physical precious metals.
We have listed some options for investing in gold through ETFs below:
The investment (GLD) seeks to replicate the performance, net of expenses, of the price of gold bullion. The trust holds gold, and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets. The gold held by the trust will only be sold on an as-needed basis to pay trust expenses, in the event the trust terminates and liquidates its assets, or as otherwise required by law or regulation.
The investment (GDX) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the AMEX Gold Miners index. The fund generally normally invests at least 80% of its total assets in common stocks and American depositary receipts (ADRs) of companies involved in the gold mining industry. The fund is nondiversified.
The Funds (GDXJ) investment objective is to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Junior Gold Miners Index (the “Junior Gold Miners Index”). For a further description of the Junior Gold Miners Index, see “Junior Gold Miners Index.”
The objective of (SGOL) the newly listed shares is to reflect the performance of the price of Gold bullion, less the Trust’s operating expenses. The Trust is open ended and is designed for investors who want a cost-effective(1) and convenient(2) way to invest in Gold as well as diversify their Gold holdings.
The investment (UGL) will seek to replicate, net of expenses, twice the performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London. The fund normally invests assets in financial instruments with economic characteristics twice the return of the index. It may employ leveraged investment techniques in seeking its investment objective.
The investment (DGL) seeks to track the price and yield performance, before fees and expenses, of the Deutsche Bank Liquid Commodity Index – Optimum Yield Gold Excess Return. The index is a rules-based index composed of futures contracts on gold and is intended to reflect the performance of gold.
The investment (DGP) seeks to replicate, net of expenses, twice the daily performance of the Deutsche Bank Liquid Commodity index – Optimum Yield Gold Excess Return. The index is intended to reflect changes in the market value of certain gold futures contracts and is comprised of a single unfunded gold futures contract.
The objective (IAU) of the trust is for the value of its shares to reflect, at any given time, the price of gold owned by the trust at that time, less the trust’s expenses and liabilities. The trust is not actively managed. It receives gold deposited with it in exchange for the creation of baskets of iShares, sells gold as necessary to cover the trust’s liabilities, and delivers gold in exchange for baskets of iShares surrendered to it for redemption. The trust is not an investment company registered under the Investment Company Act of 1940 or a commodity pool for purposes of the Commodity Exchange Act.
The investment (DZZ) seeks to replicate, net of expenses, twice the inverse of the daily performance of the Deutsche Bank Liquid Commodity index – Optimum Yield Gold Excess Return. The index is intended to reflect changes in the market value of certain gold futures contracts and is comprised of a single unfunded gold futures contract.
The investment (GLL) will seek to replicate, net of expenses, twice the inverse daily performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London. The fund normally invests assets in financial instruments with economic characteristics inverse to the index. It may employ leveraged investment techniques in seeking its investment objective.
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