GLD's Five Minutes of Fame

The possibility of a gold bubble and a potential burst has been highly debated for months, including in the pages of Registered Rep. But to me, nothing has been more exemplifying that the bubble is close to bursting (or maybe even has already burst) than the whipsaw experienced this week by the SPDR Gold Shares ETF (GLD). At the end of last week, GLD topped the SPDR S&P 500 ETF as the largest ETF, with $76.67 billion in assets. But gold prices slipped Thursday morning for the third day this week, and GLD is bleeding assets, according to IndexUniverse.com:

Investors yanked $1.55 billion from the SPDR Gold Shares (NYSEArca: GLD) on Wednesday, while adding $2.74 billion to the SPDR S&P 500 ETF (NYSEArca: SPY), as a positive durable goods report helped fuel more sharp gains in the stock market.

This put SPY back on top again, with $84.4 billion in assets, compared to GLD now at $70.1 billion, IndexUniverse said. Here's how the two ETFs compare, performance-wise (data from NASDAQ):

GLD_SPY

While $70 billion is nothing to sneeze at, it would appear GLD’s five minutes of fame are coming to an end, perhaps along with gold’s bubble. Comments from Jim Ross, global head of SPDR ETFs at State Street, may not be holding up in the unpredictable volatility we’re experiencing:

While investors may be using gold to tactically hedge against current market concerns, there is a long-term strategic case for gold in all market cycles.

That may be true, but most investors are more inclined to hit the panic button, as we saw in GLD’s massive redemptions this week. As of this blog post, the spot price of gold was down 6.2 percent to $1,747 an ounce. Is this a temporary drop, or could gold prices inch back up toward $2,000? Seeking Alpha offers some interesting insights.

My feeling is we’ll know more about what to expect after Bernanke speaks on Friday in Jackson Hole, Wyo.

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