One type of analysis you will often see on Topdown Charts is ETF flows – they can tell you a great deal about investor sentiment by looking at what investors are doing (versus what they are saying). One chart worth pointing out is that of Gold ETF flows – on a rolling quarterly basis gold ETF flows have turned negative after a period of frenzied inflows. It’s worth pausing to reflect when you see these kinds of swings…
One Of The Original Quants Has Still Not Lost His Touch With A 121% Return In 2020: In-Depth Profile Of Robert Zuccaro
Robert Zuccaro has been using quantitative investing strategies since before quant funds existed. In fact, he started one of the earliest quant funds at Axe-Houghton in 1978, 10 years before Morgan Stanley introduced its first quant fund. Q4 2020 hedge fund letters, conferences and more Zuccaro has been researching the correlation between earnings growth and Read More
The approach used to measure ETF flows for gold tracks all of the major US listed gold ETFs and takes a daily rolling quarterly view of fund flows into the ETFs and scales it by assets under management (also note it is adjusted for price so this is a pure view of fund flows).
There are a couple of insights that can be drawn from this indicator. First of all check out the bearish divergence, i.e. higher high on the gold price vs lower high on the ETF flows indicator – this represents waning interest among investors and already flagged the recent weakness. Also note that the flows indicator was displaying a high degree of optimism/bullishness in the initial move of the gold price, since then it has flipped around to outflows. While the bearish divergence suggests a bearish bias, the fact that flows have reversed could actually make for a good contrarian buying opportunity to get set if gold continues its upward move.
Bottom line: Gold ETF flows have gone negative after a frenzy earlier this year, this could be a contrarian buy signal all else equal.