Gold Bubble Worries Lead to Significant Sell-Off in Top Gold ETF


". . .largest one-day drop in around five months."

The world's largest gold-backed ETF, SPDR Gold Trust (GLD), noted that its holdings fell to 1,116.247 tons, worth over $41 billion at the current gold price, as of December 8th. This represented a fall of 1.2% or more than 13 tons in a day and was the largest one-day drop in around five months according to a Reuters report. The SPDR Gold Trust ETF hit a record high of 1,134.03 tons on June 1, and up until recently had been climbing back towards this level again.

Further falls were expected to be announced today as the gold market is going through a period of uncertainty and some investors are liquidating some or all of their holdings, and taking some hefty profits, in case the recent gold price falls are because a gold price 'bubble' has burst.

The SPDR Gold Trust gold holdings are larger than those of most nations' Central Banks, and there has always been a worry that this overhang of gold, effectively in fickle investors' hands, could in itself prompt a catastrophic fall in the gold price if sentiment moved sufficiently to generate a major sell-off, leading to a downwards price spiral.

So far this has not happened, and with the weaker dollar this morning seeing the gold price pick up, and continuing economic uncertainty, there is evidence of buyers coming back into the gold market seeing the earlier falls as a good buying opportunity, and ignoring the 'bubble' talk.

There is no doubt that the recent sharp movements in the gold price that have seen it fluctuate up and back down by nearly $100 in the past weeks make this a market for those with nerves of steel. Several observers have warned of excessive volatility ahead and these warnings are definitely coming into play.

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