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Aug. ETF Short Report: GLD Shorts Fall 31%

Aug. ETF Short Report: GLD Shorts Fall 31%

Related ETFs: GLD | EEM | VWO
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Short-sellers abandoned their bets against gold last month in droves as the prospect of a third round of quantitative easing from the Federal Reserve shifted from a remote possibility to something that seemed increasingly tangible.

The number of shares short in SPDR Gold Shares (NYSEArca: GLD), the world’s biggest physical bullion ETF, fell 31.2 percent—a complete reversal from July, when short interest in GLD spiked by 55 percent amid incipient sentiment that the decade-long gold rally might be growing long in the tooth.

But Fed officials, increasingly concerned that a faltering jobs market could spell even deeper trouble for the world’s biggest economy, changed all that with increasingly pointed comments last month about how so-called QE3 was looking more possible than ever. That talk turned real last Thursday with the launch of a new stimulus program.

Other data points we collect at IndexUniverse also brought home the point that gold was coming back into favor as the central bank contemplated more stimulus. For one, GLD was the single most popular ETF in August, hauling in almost $2 billion in fresh assets as investors began positioning themselves for the possibility of QE3, as we wrote at the end of last month.

Moreover, from a price perspective, all those short-sellers covering their positions looked quite sensible in the rearview mirror. GLD jumped almost 6 percent in August, ending the month at $164.22 a share. The ETF has jumped another 3.8 percent since the end of last month.

Indeed, the launch of QE3 last Thursday—an open-ended commitment for the Fed to purchase as much as $40 billion worth of mortgage-backed securities a month—has stoked prices of commodities priced in dollars such as gold and, more broadly, encouraged the return of “risk-on”-type trading that favors asset classes such as emerging market equities.

To that end, the nearly 17 percent drop in the number of shares short of the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM) was another clear sign that investors were preparing for QE3 last month.

As was the case regarding inflows into GLD, an analogous pattern of creations activity could be seen in last month’s IndexUniverse ETF flows report, only EEM’s rival fund, the Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO) was the most conspicuous beneficiary of renewed "risk-on" behavior.

VWO pulled in $824.3 million in fresh assets in August, making it the second-most-popular U.S.-listed ETF after GLD.

Big Bets
Ticker Name % Float Short 1 Month % Change $Short ($, M)
SPY SPDR S&P 500 28.10 4.56 29,766.91
IWM iShares Russell 2000 86.89 -11.87 13,163.25
QQQ PowerShares QQQ 10.38 -2.95 3,638.20
XLE Energy Select SPDR 35.21 -5.70 2,644.07
GLD SPDR Gold 3.50 -31.17 2,458.46
IYR iShares Dow Jones U.S. Real Estate 46.29 17.60 1,833.63
XLF Financial Select SPDR 23.92 -8.88 1,635.71
EEM iShares MSCI Emerging Markets 4.64 -16.89 1,592.66
XRT SPDR S&P Retail 219.61 -24.14 1,586.42
XOP SPDR S&P Oil & Gas Exploration & Production 177.76 -12.74 1,537.55

 

Really Really Short
Ticker Name % Float Short 1 Month % Change $Short ($, M)
RKH Market Vectors Bank and Brokerage 398.71 -0.80 44.17
FXE CurrencyShares Euro 266.82 8.22 633.61
XRT SPDR S&P Retail 219.61 -24.14 1,586.42
XOP SPDR S&P Oil & Gas Exploration & Production 177.76 -12.74 1,537.55
RTH Market Vectors Retail 120.71 -37.78 43.99
CVOL C-Tracks Exchange-Traded Notes on the Citi Volatility 91.55 29.15 5.36
DWAS PowerShares DWA SmallCap Technical Leaders 90.83 197.16 7.03
FXY CurrencyShares Japanese Yen 90.08 100.25 192.04
IWM iShares Russell 2000 86.89 -11.87 13,163.25
KBWR PowerShares KBW Regional Banking 79.48 -11.96 13.27

Data is believed to be accurate; however, transient market data is often subject to subsequent revision and correction by the exchanges.

 

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