ETF Analyst Says ETF Gold Is In Strong Hands

Nicholas Brooks, head of research and investment strategy at ETF Securities, is buying into a necessary plank of what I called the "New Era story" for the coming gold bubble: gold being seen as an alternate currency. It ties in with the sovereign-risk theme that is lending some support to the price of the metal.

He had this to say about gold-ETF demand:

Brooks maintains that the gold ETF market is rather less prone to the speculative vaguaries of things such as currency fluctuations than other parts of the gold market.
"We find that the flows are quite stable. In other words during periods when the gold price has dropped sharply we have rarely seen very large outflows - at the same time when the gold prices is rallying at a very aggressive rate we don't tend to see a surge in inflows into the gold ETFs - a lot of the flows into the physically backed gold ETFs are strategic in nature.

And, while he admits it is too early in the cycle to know exactly how long-term these flows are, he does say that "most of our investors are large institutions and pension funds and fund managers and private wealth as well and again the pension fund of course will have a very long time horizon."

In other words, the stronger hands, intending to hold for longer-term reasons, are investing in ETFs.


There is some evidence that the SPDR Gold Trust's holding are positively correlated with the gold price, but not by much. The changes reported are net changes, so momentum and arbitrage plays are mixed in with strategic investment.