Gold ETF Investors Sell as Rally Takes a Breather

Mixed economic messages are sending gold investors elsewhere after dip in spot price.

Wealth Management Editor
Reviewed by: Staff
Edited by: Staff

Gold's rally has fizzled for the time being, and investors are grabbing the opportunity to sell their exchange-traded funds that invest in the precious metal.  

Gold is down about half-of-a-percent this past month, after a year-long rally that had pushed the price up 18%. The $61 billion SPDR Gold Trust (GLD), which is up 13% this year, lost more than $193 in outflows on April 26 as the spot price of the commodity was starting to pull back from its April 15 high. The fund has lost $2.92 billion in investor money through April 26.

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Market watchers are tying the outflows to an increased likelihood of the Federal Reserve cutting interest rates this year, which is dependent on more bullish economic data, including lower inflation.

In the meantime, investors and financial advisors are selling high when it comes to gold exposure across the ETF spectrum.

GLD Has Outlfows Amid Rising Gold Price 

The $561 million Direxion Daily Gold Miners Index Bull 2X Shares ETF (NUGT), which offers leveraged exposure to an index of global gold and silver mining companies, experienced $20 million worth of outflows on April 29 followed by another $6 million on April 29.

NUGT is up 19% so far this year, including a 75% gain since Feb. 28.

The outflows of the gold ETFs that have been outperforming the broad market equity indexes suggests traders are betting on improving economic data.

While NUGT is designed to be a trading vehicle, investors often hold GLD as a longer-term position to tamp down portfolio volatility.

But not all financial advisors see the value of owning gold for anything but tactical moves.

“For long-term investors, gold is a poor investment,” said Michael Rosen, chief investment officer at Angeles Investments in Santa Monica, Calif.

He prefers inflation-linked bonds that pay a premium over inflation, and equities that have compounded returns significantly above inflation.

“Gold can be thought of as a currency that pays no interest but generally holds its value against inflation over the very, very long term,” Rosen added. “So, gold is a currency, not an investment.”

Ultimately, it appears investors are pulling back from gold at a time when better economic news would push the commodity’s value lower, and the current mixed bag of economic data is reflected in the flatlining price over the past few weeks.

Meanwhile, for those financial advisors who are especially bearish on the yellow metal, there is always the Direxion Daily Gold Miners Index Bear 2X Shares (DUST), which is down more than 23% so far this year.

Jeff Benjamin is the wealth management editor at, responsible for coverage related to the financial planning industry. This includes writing, hosting podcasts, webinars, video interviews and presenting at in-person events.

Jeff is a veteran journalist with more than 30 years’ experience covering the financial markets. He has won more than two dozen national and regional awards for his reporting. He most recently worked as a senior columnist at InvestmentNews where he wrote about investment products and strategies, as well as the broader financial planning industry. Prior to that, Jeff worked as an analyst at Cerulli Associates where he researched and wrote reports on the alternative investments industry. Jeff also worked as a money management reporter at Dow Jones Newswires, where he covered the mutual fund industry.

Based in North Carolina, Jeff is a former Marine and has a bachelor’s degree in journalism from Central Michigan University.