All that glitters…

All that glitters…

By Paul Price

The prices of both physical gold and all gold-related ETFs are getting crushed again today. Higher margin requirements from commodity trading firms and the plunging value of gold have combined to trigger forced selling around the world.

 Gold Dumping image

The SPDR Gold Shares ETF (GLD) alone had seen more than 7.2 million equivalent ounces redeemed since the start of 2013 through last Friday. Management of gold-based ETFs make no judgment calls on the direction of the yellow metal. They simply buy or sell based on net purchases and redemption orders. 

As gold prices neared $1900 in August of 2011, the GLD ETF briefly had $77 billion in assets. At that fateful moment, its holdings made it larger than the more mundane, but much more mainstream SPY (S&P 500 ETF). 

The ultimate low in gold pricing will not occur until all the forced margin sales and the sale of gold reserves by cash-strapped countries has subsided. It is impossible to say where the final bottom will occur. 

For now, I’d advise gold bugs to stand aside rather than try to pick an entry point. 

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