August 15, 2022

Will Speculative Positions in the GLD and SLV Accelerate a Precious Metals Selloff?

Given the recent pullback in the prices of gold and silver, it was not unexpected to see another decline in the holdings of both the SPDR Gold Shares Trust (GLD) and the iShares Silver Trust (SLV).

Holding in the GLD declined by 21.85 metric tonnes, compared to a decline last week of 20.04 tonnes.  The year to date decline now totals 51.14 metric tonnes, representing 1.8 million ounces of gold worth about $2.4 billion.  GLD holdings had declined by 39.75 metric tonnes in 2010 after reaching record high of 1,320.47 tonnes on June 29.

Fluctuations in the holdings in the SPDR Gold Shares Trust are not always directly correlated to price movements in the metal.  As holdings were declining from all time highs in late June, the price of gold continued to soar another $200 per ounce from the $1200 level in July to $1400 by October.

Some have expressed concerns that declines in the price of gold may be compounded if large positions in the GLD held by speculators are sold. Since late 2008, the GLD has doubled in value as gold prices soared.  With the GLD holding a huge $52.5 billion worth of gold, any large scale liquidation of positions would certainly seem to have the impact of accelerating a price correction in gold.

1 Year Gold - Courtesy kitco.com

GLD and SLV Holdings (metric tonnes)

Jan 26, 2011 Weekly Change YTD Change
GLD 1,229.58 -21.85 -51.14
SLV 10,447.70 -127.62 -473.87

Silver holdings in the iShares Silver Trust declined by 1.2% for the week, representing reduction of 127.62 tonnes.  The year to date decline has now reached 473.87 tonnes, or a 4.3% from the beginning of the year.  Meanwhile, the price of silver has seen a 10% drop from its high of $30.70.

The SLV represents an easy vehicle for hot money to jump into the silver market and purchases by the SLV have contributed to demand for silver.

Increased silver purchases by the SLV helped to propel silver prices higher last year, but this same process can work in reverse.   Large sell orders by speculative holders of the SLV could result in a sharp decline in the price of silver as the SLV liquidates its holdings.

One year silver - Courtesy kitco.com

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