Gold ETF Selling Slows

With gold falling to new correction lows, American stock traders were increasingly worrying about the yellow metal’s lack of upside momentum. So they kept on dumping GLD and IAU shares even as gold bounced sharply in early December. GLD+IAU holdings kept falling on balance into late December, slumping as low as 1,690.6t. That extended their own total correction to 6.1%, or a major 109.9t holdings draw.

The main reason I’m writing this essay is this differential gold-ETF-share selling is slowing. During this gold bull’s prior corrections, GLD+IAU selling proved aggressive initially after stock traders finally understood gold was really selling off. But those sharp selloffs soon started moderating, the pace of liquidations in gold-ETF shares slowing. We are seeing that again today, a deceleration which is bullish for gold.

Once differential gold-ETF-share selling ceases and reverses into buying, that really accelerates gains in gold’s subsequent uplegs. In August, September, October, and November, GLD+IAU holdings changed by +23.5t, +30.2t, -2.2t, and -62.1t. That normal post-gold-topping pattern is very evident, lagging builds lasting until stock traders get spooked then selling really snowballs. But this month that considerably slowed.

With December almost over, this month’s GLD+IAU draw so far is only running -29.0t. That suggests the crucial upleg-boosting shift from differential gold-ETF-share selling to resuming buying should be nearing. The sooner stock-market capital starts flowing back into gold bullion via these major-gold-ETF conduits, the bigger gold’s next upleg will grow. So GLD+IAU holdings even stabilizing after a correction is really bullish.

That marks the turning point when stock-market capital outflows from gold stall out before inflows resume. The major-gold-ETF holdings draws during and after corrections in this gold bull only suffered a single downleg before stopping and reversing. So precedent suggests differential gold-ETF-share selling isn’t a pulsing flowing-and-ebbing thing but one sustained liquidation bout. Once that runs its course, buying resumes.

Thus GLD+IAU holdings seeing their capital outflows moderate ahead of a stabilizing is an important sign this apparent young gold-bull upleg is indeed righteous. And it is ready to accelerate as differential gold-ETF-share buying returns. And once stock-market capital inflows into gold resume, they tend to run for many months until gold grows too overbought exhausting its latest upleg. All this is certainly bullish for gold.

The recent GLD+IAU-holdings action buttresses the case that gold carved a major correction bottom in late November so a new bull-market upleg is getting underway. That thesis has led us to aggressively redeploy in fundamentally-superior gold-mining stocks starting in late November. The major gold stocks tend to amplify gold’s upside in bull uplegs by 2x to 3x, with smaller mid-tier gold stocks outperforming more.

Despite adding 10 and 4 new gold-stock and silver-stock trades in our weekly and monthly newsletters over the past 5 weeks or so, our redeployment continues. Late in gold corrections and early in its uplegs are the best times to deploy capital in great mining stocks at relatively low prices. Then later after those gold uplegs mature and gold stocks soar, those trades can be sold at relatively-high prices realizing big gains.

The bottom line is the differential selling in the dominant gold ETFs looks to be slowing. The GLD+IAU holdings draws spawned by gold’s latest correction are moderating now that it has passed. That is a bullish omen for gold, as its subsequent upleg can accelerate after differential gold-ETF-share selling pressure ends. When that reverses into buying, stock-market capital inflows into gold amplify its upleg gains.

Major-gold-ETF-holdings troughs are an important confirmation that gold’s correction has yielded to the subsequent upleg. While GLD+IAU holdings haven’t decisively carved their latest, they are moving in that direction. That ups the odds gold’s next bull-market upleg is indeed underway, making for a great time to add gold-stock positions to ride it higher. Buying in relatively-low early in uplegs makes for big gains later on.

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