Europe’s Hot, Gold’s Not – ETF Fund Flows

| September 9, 2013 | 0 Comments

fund flowsToday we’re taking a look at ETF fund flows in Vanguard FTSE Europe ETF (VGK) and SPDR Gold Trust (GLD).

ETF fund flows are a valuable indicator of what traders are thinking.  It takes a lot of buying or selling to drive millions or even billions of dollars into or out of individual ETFs.

Fund flows are something traders use to find trends and gauge investor sentiment.  And it can help you pinpoint which ETFs could be next to make a big move higher or lower.

Let’s take a look the ETFs leading in net inflows and outflows so far in the 3rd quarter…

Vanguard FTSE Europe ETF (VGK) has collected $2.5 billion in the first few months of the 3rd quarter.  VGK is the largest European stock ETF with $11.7 billion in assets under management.  It holds more than 500 stocks from 17 countries.

VGK is up 25% from the 52-week low of $42.44.  And it’s currently just under the 52-week high of $53.33.

The massive inflow of money into VGK and other ETFs that hold European stocks was spurred on by economic data.  More specifically, the recession in the EuroZone ended in the 2nd quarter.

Investors are clearly looking at the return of economic growth in Europe as a catalyst for higher stock prices in the region.  And for good reason…

The European Central Bank seems to be actively encouraging investors to put money into European stocks.  They’ve essentially said they will be more supportive than the US Federal Reserve.

One thing’s for sure, the Fed’s support has helped drive US stocks higher this year.  You can’t blame investors for pumping money into VGK if European stocks are the next central bank fueled bull market.

On the other hand, SPDR Gold Trust (GLD) has experienced the most redemptions in the 3rd quarter.  Investors have pulled a whopping $2 billion out of GLD over the last two months.

But it’s important to note the lion’s share of the redemptions came early on in the quarter.  Investors have begun to put money into GLD as it has climbed 17% from the 52-week low of $114.68.

The bullish sentiment toward the yellow metal can also be seen among traders of commodity futures.  Speculators are trimming bearish bets on gold and increasing their bullish positions.

However, a quick look at a chart of GLD reveals the ugly truth.  Gold prices are in a downward trending price channel.

The selloff in GLD in the first half of the year was overextended to the downside.  The recent bounce has alleviated the oversold conditions but it’s still trapped below resistance of the series of lower highs.

In short, GLD could be on the verge of rolling over again.  I’d avoid buying GLD right here.  And even look at using an inverse ETF like ProShares UltraShort Gold (GLL) to profit from lower gold prices.

That wraps up this week’s ETF fund flows…

Keep in mind, there’s a lot of information about ETF fund flows.  And it can be a very useful tool as long as you know what you’re looking for.

Good Investing,

Corey Williams

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Category: Commodity ETFs, ETFs, Foreign Market ETFs

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets three times a week. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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