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In Gold Selloff, Hedge Funds Likely Driving ETF Outflows: Commerzbank

We won’t know which brand-name money managers are selling off gold until the next round of quarterly portfolio filings, which I believe doesn’t come until mid-May. But the fingers are already being pointed at hedge funds.

Commerzbank’s commodity strategists this morning float the idea that hedge funds are the big sellers when it comes to exchange-traded fund outflows. Keep in mind, ETF flows are the factor that lots of strategists lately are saying is the sina qua non of strength in gold’s price. Whether that’s actually true is unclear (though I’ll bet that inflows have to help at least a bit). Here’s Barclays Capital’s commodity strategists arguing recently that gold’s greatest risk is the loss of “stickier” ETF investors.

Surveying the ETF flows, here’s Commerzbank this morning: ”It would appear that a number of institutional investors in the US – probably hedge funds – are currently withdrawing from gold, for the outflow from the gold ETFs is largely attributable to the SPDR Gold Trust in the US.”

The backstory is that the SPDR Gold Trust (GLD) has become the preferred gold investment for a number of institutional investors. With its deep liquidity and heavily traded options market, it’s a more attractive exchange-traded means of buying and holding gold than resorting to the futures market for a great many investors. John Paulson’s Paulson & Co., to take an oft-cited example, is the single biggest owner of GLD, with a little over 5% of shares outstanding.

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