Are Record Outflows From GLD Cause For Concern?

[Some thoughts about the recent outflow of bullion from the SPDR Gold Shares ETF.]

The popular SPDR Gold Shares ETF (GLD) saw outflows for the seventh straight day yesterday as more U.S. investors appear to be dumping the metal in favor of other investments, notably U.S. stocks.

Is this cause for concern for gold investors?

Well, it might not be a bad idea to worry a little bit, particularly over the very short-term because there is not a catalyst in sight in the week or two ahead to bolster gold prices.

Dovish comments by Federal Reserve Chairman Ben Bernanke earlier this week provided only a temporary reprieve from the recent selling in yet another reminder of how poor sentiment in this market currently is.

But, over the long-term, investors who hold onto their GLD shares will surely be rewarded since, despite the recent optimism about the U.S. economy that has accompanied soaring U.S. stock prices, we are unlikely to avoid one of two outcomes:

1. Much higher inflation
2. Another financial crisis

These arguments were laid out in last week’s “Why You Should Hold Onto Your Gold And Silver” and will be further explored in future articles, but declining GLD holdings are the focus today.

As shown below, per the latest data at the SPDR Gold Shares website, GLD holdings fell by another 12 tonnes yesterday to 1,258 tonnes, the lowest since August and the seventh straight daily decline that has now totaled 65 tonnes.

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