GLD holdings explode as investors rush to safety
(Kitco News) After being snubbed by investors in 2021, the world's largest gold-backed ETF saw its biggest daily inflow since listing in 2004.
In another sign that investors are flocking to precious metals, SPDR Gold Shares (NYSE: GLD) reported on Friday its largest inflow in U.S. dollar terms since its listing in 2004, which translated to more than $1.6 billion.
Based on the data provided by the GLD, there were 27.6 metric tons of gold inflows on Friday.
Fluctuations in ETF holdings are a good indicator of investor interest in gold. In 2021, gold ended the year with the biggest loss in six years as analysts pointed to a lack of investor interest as one of the critical triggers behind precious metal's underperformance. And the annual numbers from the GLD revealed a similar trend.
The world's largest ETF saw its biggest annual outflow in nearly a decade, losing approximately $14.1 billion in assets in 2021, translating to around 195 metric tons worth of bullion. The GLD ETF was also the second top ETF of the year by outflow in absolute dollars, preceded only by iShares iBoxx USD Investment Grade Corporate Bond ETF, according to the data provided by ETF.com.
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Now, this bearish sentiment around gold is shifting, with the precious metal once again touching 2-month highs on Monday. The risk-off sentiment in the marketplace is being fuelled by a more hawkish Federal Reserve and increased geopolitical tensions.
"Gold prices performed nicely compared to the pain that hit most commodities. Gold got good news on Friday after the largest bullion-backed exchange-traded fund, SPDR Gold shares, posted its biggest net inflow in dollar terms since listing in 2004. A laundry list of geopolitical risks will likely lead to safe-haven flows for gold that should help it soon break above the $1,850 level," said OANDA senior market analyst Edward Moya.
All eyes are on the Federal Reserve monetary policy announcement coming this Wednesday. Markets are pricing in a rate hike in March and hoping to get some clarity around the timing of a possible balance sheet runoff.
"Market expectations going into the Fed's January FOMC policy decision have violently swung from a gradual tightening to an aggressive hawk. Powell's latest testimony signaled that the balance sheet runoff decision could take two, three or four meetings." Said Moya. "The current Fed pivot has proved disruptive to growth forecasts and that may unsettle many at the Fed."
Also, the rising geopolitical tensions between Russia and Ukraine are adding uncertainty to an already very cautious marketplace. Over the weekend, the U.S has issued an order for diplomats' family members in Kyiv to leave Ukraine, citing the "continued threat of Russian military action."
The U.K. government, in the meantime, said that Russia is plotting to install a pro-Kremlin government in Ukraine. And on Monday, NATO announced it was sending more ships and jets to Eastern Europe.