Gold ETF Quarterly Performance And Analysis

Gold ETF products finished the first quarter of 2012 in a draw. Physical gold ETFs GLD and IAU gained slightly more than 6%. Gold stock ETFs like GDX and GDXJ lost between .6% and 3.6% respectively. Although both sets of ETFs started 2012 strong, the final month of the quarter weighed heavily on their performance. Positive economic data from the United States, comments from the Fed that squelched hopes of an imminent QE3 and the assault of gold demand in India (taxes) and China (economic slowdown) all worked together to pare back a significant amount of gold ETF gains in the last third of Q1.

Physical Gold ETFs

Physical gold ETFs - at least three of the four largest - were grouped together in performance for the quarter. The continued success of iShares' IAU - in performance and inflows - versus GLD in Q1 was notable. IAU outperformed all physical gold ETFs in Q1 with a 17 bps edge on the second best performing gold ETF and rival, GLD. IAU also attracted assets at a faster proportional rate to GLD, albeit it is easier to do so at a smaller fund size. Here's a chart of Q1 physical gold ETF inflows from the Index Universe ETF Flow Tool.

Remember GLD is a $73.5 billion dollar ETF and IAU has $10.3 billion in assets, a seven fold difference. Thus GLD's inflow at around 3.5 times that of IAU shows that IAU is gaining material ground on GLD through new flows. This is likely due to its rock bottom 25bps expense ratio, 15bps less than GLD.

SGOL, the ETF Securities gold ETF which stores gold exclusively in Switzerland, produced a moderate inflow for the quarter. AGOL, which stores its gold exclusively in Singapore, was flat for the quarter. It was the worst performing physical gold ETF for the quarter, 115 bps below leader IAU. Here's the snapshot from the physical gold ETF performance grid on GoldETFs.biz.

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From a technical perspective, gold as represented by GLD, has been violating its 100 day moving average more frequently of late. Here's a two year chart from stockcharts.com displaying GLD's price and 100 day moving average. Note the growing frequency of red declines below the 100 day average.

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Gold Stock ETFs

Gold stock ETFs shot forward in 2012, after a dismal 2011, only to be pulled back into negative territory late in the quarter. All gold stock ETFs lost value in Q1 and were victimized by a month long meltdown that began at the end of February on Fed comments. Here's the snapshot from the gold stock ETF performance grid on GoldETFs.biz.

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In Q1 gold stock ETFs lived up to their penchant for increased volatility versus physical gold ETFs - on the upside and downside. In addition, the disconnect between gold stocks and gold prices continued to be a point of interest. Here's the one year chart from stockcharts.com displaying the behavior of GDX, the largest gold stock ETF, in relation to GLD.

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GDXJ, the best performing gold stock ETF in Q1, gathered the most inflows. GDX, the largest gold ETF, was the only gold ETF with outflows. Another interesting comparison from this group involves iShares and Global X. iShares introduced its first gold stock ETF, RING, a month into Q1. RING went on to gather almost $23 million of inflows. Meanwhile Global X's two gold stock ETFs, GGGG and GLDX, together took in just $5.2 million over the entire three months of Q1. RING's peer group low expense ratio and space on iShares shelf are likely the drivers of its success. On the flip side, with 13 months in the market and just $4.8 million in assets, Global X's GGGG appears to be a candidate for closure. Here's the inflow chart from Index Universe.

Gold Outlook

Going forward, gold appears to face significant headwinds in the short term. Improving economic data, strong equity market returns and concerns about the two largest gold consumers, India and China, do not bode well for the metal. Over the long term however, gold still appears to be under owned as an asset class, maintains a long history of preserving value relative to paper currency and is in limited supply. Thus for the longer term investor, weakness in gold will likely present buying opportunities. For the short term investor however, it appears that gold has lost its luster for the time being.

Original Article

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.