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GLD Gold Holdings Uptick Modestly In 2017; TDS Sees Rise In 2018

Kitco News

Editor's Note: View Kitco News' full 2018 outlook coverage

(Kitco News) - SPDR Gold Shares (NYSE Arca: GLD), the world’s largest gold-backed exchange-traded fund, posted a modest inflow of roughly 15 metric tons during 2017.

The figure might look better than it is since the inflow came from a low level of overall holdings, pointed out Ryan McKay, commodity strategist with TD Securities. However, he said TDS looks for those inflows to pick up in 2018 as gold prices rise.

Data on the GLD ETF website show that holdings of the yellow metal to back the shares – which track the price of the commodity but trade like a stock – stood at 837.5 metric tons as of the end of December. This was up from 822.17 tons on the final day of 2016.

However, a sharp decline previously occurred near the end of 2016 on liquidation-related selling after the election of U.S. President Donald Trump, perhaps making the rise for 2017 somewhat “misleading,” McKay pointed out. GLD holdings were at 949.69 tons as of Nov. 8, 2016, the day Trump was elected, meaning they then declined nearly 128 tons into the end of that year.

“ETFs were liquidated a lot post-Trump in November-December,” McKay explained.

GLD holdings picked up again in 2017 as gold prices recovered, hitting a peak of 867 tons in June, before falling below 800 in July and August and then recovering again in autumn. Holdings fell at a time when the market started factoring in a more hawkish Federal Reserve, McKay noted.

“ETFs will increase from here,” he predicted.

He described TD Securities as bullish on gold prices on ideas that the Federal Reserve will not be as hawkish as policy members have hinted in the past, likely to be held back on monetary tightening due to concerns about subdued inflation. This may mean pressure on the U.S. dollar, which in turn tends to support gold.

Further, McKay said, there is potential for a pickup in ETF buying from equity funds that hold only long positions, with this buying expected as the result of increased geopolitical and equity-market risks.

“You’re get some demand from there as well,” McKay said.

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