Gold did loose close to 3mln ounces over a couple of months back in late 2008 when markets fractured. This was proportionately a much larger part of ETF holdings vs. the current outflows, but this is the largest and most aggressive sell down in volume terms since ETFs where introduced back in 2004.
Holders of ETFs are a mixed bunch, ranging from pension funds to hedge funds to retail investors. We might get some sense of who sold out once the 13F filings are complete and might be at least driven by one large holder (Paulson & Co is the obvious target).
Many analysts are now citing potential investor selling as providing further downside risk to gold prices, which seems to be a rather useless statement. More useful would be to understand why investors are selling and whether they are right too.
The bulk of selling from ETFs was from the 21st to the 27th of Feb, with the huge drop on the 21st likely triggered by the release of the Fed minutes which suggested some division within the FOMC on the continuation of QE. This, however, was subsequently hosed down by Bernanke in a couple of different appearances (see this post).
So if these participants sold out because they thought QE would end earlier than expected, then they are probably wrong.
Another legitimate question is whether the big sell down in ETF holdings actually matters to the price. This is an enormous amount of gold for physical markets to digest in a short period of time and is visible to everyone.
But as the chart on the left shows, gold didn't do much outside of what it has done for the last 12+ months against the dollar.
If anything, the sell down in ETFs suggests a large numbers of holders of gold have been nervous about the prospects of QE from the Fed ending.
But for the outlook for gold prices you have to ask yourself 1) whether they are right and 2) how much it actually matters to the price. For me, the answer no and not so much.
