Exchange-traded funds that invest in gold have amassed a huge, 2,100-tonne stash of the yellow metal. If held by a country or monetary institution, the impressive pile of bullion would be the world's sixth-largest gold hoard.
With so much gold held by ETFs, some market watchers have become nervous about what might happen to bullion prices if investors holding these securities ever decided to dump them.
The worry: Just as the huge wave of gold buying by the ETFs during bullion's bull market helped support prices or even drove them higher, a decision by holders to get out could lead to bullion being dumped on the market, triggering lower prices.
If investors started saying, "Hey, we're getting out of here," it could have "an accelerative effect on price declines," says Jon Nadler, who writes a blog about gold at Kitco.com, a website for precious metals investors.
Another possible reason for worry is that ETF shareholder lists are dominated by big hedge funds, which could add price instability during a decline because these investors are under immense pressure to perform and aren't likely to be patient holders in a bear market.
"The ownership makeup of these things is so skewed towards speculative hedge funds," Mr. Nadler says. "I don't think they're necessarily long-term, loyal, sort of man-in-the-street holders of gold."
The biggest shareholder in the largest ETF - SPDR Gold Shares - is Paulson & Co., the hedge fund that made its reputation betting on mortgage defaults during the 2008 market panic. Paulson didn't respond to a request for comment. According to Bloomberg, it owns shares worth about $4.3-billion (U.S.) in gold via its holdings of the ETF.
ETFs that invest directly in gold are a relatively new financial innovation, and have never been tested by a severe market decline. SPDR - the first gold ETF - was created in late 2004, and since then there hasn't been a down year for gold prices.
The allure for investors in the ETFs is that they make exposure to bullion as easy as buying or selling shares on the stock market. Any net flows of new money into the securities leads to the purchase of bullion on the open market. When there are net sales, the reverse happens and gold is sold.
Before the development of exchange-traded funds, investors wanting exposure to bullion had to do it the hard way - buying actual bars or coins containing the metal, a cumbersome process that involved high assay, insurance and foreign exchange costs. It's commonly assumed that the ETFs, by making it easier to buy and sell gold, have expanded the precious metal's pool of investors.
But quantifying the impact the ETFs have had on prices during the bull market is difficult. It's even harder to estimate what might happen if a group of investors all wanted to liquidate their gold in a hurry.
One rough indication of the magnitude might be a conventional, large-scale transaction for gold. In October, 2009, India's central bank bought 200 tonnes from the International Monetary Fund. Gold had been trading around $1,060 (U.S.) an ounce, but quickly jumped by about $60 after news of the purchase hit the market.
To be sure, not everyone thinks the ETFs are having their main impact on gold prices. David Franklin, an analyst at Sprott Asset Management, says the money flowing into ETFs has reduced investor appetite for shares of gold producers, and made it more difficult for mining companies to raise capital.
Sprott, a Toronto-based money manager, offers both gold ETFs and has funds that invest in mining companies.
Before the ETFs, investors wanting exposure to the gold space often sought it by purchasing shares of mining companies. "When you talk about the dynamics of ETFs, that's a far more important dynamic," Mr. Franklin says of the impact on miners.
Other analysts believe the gold market could absorb selling by the funds.
Juan Carlos Artigas, investment manager at the World Gold Council, which developed the SPDR fund, says ETFs account for only about 8 per cent of gold demand. The biggest share of gold demand currently is jewellery, with about a 50-per-cent share, followed by bar and coin demand at about 25 per cent.
The gold market "is a very deep and liquid market," Mr. Artigas says.
He said the ETFs don't lead to artificial distortions in prices due to their buying and selling activity because even without them, investors who wanted exposure to gold would find ways to be in the market anyway. The ETFs are "just another way to access the market," he said.