Gold prices have moved up by almost $200 off of the October lows. Ordinarily, that would bring a response by investors to start buying into GLD and IAU, the big gold bullion ETFs. But they are not doing that (yet), and that is really interesting.
The normal behavior by investors is to buy into these ETFs when gold is rising, then sell out of them when gold prices fall. Extremes of either buying or selling can be useful indications of a sentiment extreme, worthy of a top or bottom for prices. That is how things normally work.
What is happening now is not normal. Gold prices have been rising, and they jumped a whole lot on Dec. 1, 2022 thanks to a little bit of dollar weakness. But up through Nov. 30 (the most recent data available), there has not been any response by investors trying to reposition themselves into these ETFs.
Both GLD and IAU hold gold bullion to back their shares. If the shares trade at a price significantly different from the net asset value (NAV), then these funds will issue or redeem shares as needed to get the trading price back close to the NAV. When the funds do that, the total asset levels will change.
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Given the big jump in gold prices since October, we should expect that public sentiment toward gold should be turning more bullish, but it is not. Investors are still avoiding these ETFs, which means that their bearishness is more firmly rooted. That is actually bullish for gold prices, because, to get a top for gold prices, we would expect to see investors clamoring to get into gold. They are not at that point yet, which conveys the message that gold is going to have to trend higher for a lot longer to get sentiment to change.