Pay Attention to These Changes in GLD Asset Levels

02/05/2016 7:00 am EST

Focus: ETFs

Tom McClellan

Editor, The McClellan Market Report

Tom McClellan of The McClellan Market Report points out that when there is a big surge into GLD—as he’s been seeing over the past two weeks—it is a sign that there is huge bullish interest, a phenomenon which typically happens as gold prices are topping.

In spite of dollar strength, gold prices have rallied up from the low we saw back in mid-December.  It took a while, but this rally has finally started to bring more interest from retail gold investors.

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February 04, 2016
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The SPDR Gold Trust (GLD), reports total assets held in the ETF every day.  Asset levels vary along with investor interest.  If more investors want to own GLD, then the price goes up above the net asset value (NAV), and so the sponsoring firm issues more shares to restore the proper balance between share price and NAV. The money taken in from those additional share sales gets used to buy up more gold to be held by the trust. Similarly, when everyone wants to get out of GLD, the sponsoring firm sells the gold bullion, getting cash to redeems those shares, and thus keeps the NAV and share price close together.

Generally speaking, GLD assets rise and fall in sympathy with gold prices.  Rising gold prices get people more excited about owning gold and falling prices have the opposite effect.

Paying attention to these changes in asset levels can be really useful as a sentiment indication. When investors are fleeing rapidly, that can be a sign of a sentiment washout suitable for a price bottom.  And when there is a big surge into GLD, as we have been seeing over the past two weeks, it is a sign that there is huge bullish interest, a phenomenon which typically happens as gold prices are topping. To read the entire article click here…

By Tom McClellan, Editor, The McClellan Market Report

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