Thursday, June 27, 2013

Chart of the Week – GLD Metal Holdings

Reported metal holdings at SPDR Gold Trust (NYSE: GLD), the largest gold exchange traded fund, reflect significant negative money flow since December, 2012.  So-called hot money, investors, portfolio managers and hedge funds have apparently bought in, hook, line and sinker, to the notion that the world’s largest central banks printing oceans of new fiat currency units has “saved the global economy,” lessening the apparent need to hold gold as portfolio insurance.

If only that were true – that increasing debt in huge amounts by printing money solves a problem of too much government debt in the global economic engine.  We could just print up millions for everyone and people would die of happiness.  (Sarcasm.)   


Specifically, from December 10, 2012 to June 26, 2013, GLD metal holdings declined 383.85 metric tonnes (about 28%) from a record high 1,353.35 tonnes to 969.50 tonnes.  (Down 12.3 million ounces troy, from 43.5 million oz. to 31.2 million oz.)  For the same period gold fell $476 or 28% from $1,712 to $1,236 basis the London PM fix. 

Metal reductions reflect negative money flow, more selling pressure than buying pressure, which causes the trust's authorized participants to redeem shares and sell gold into the market in order to keep the GLD share price in line with the spot price of gold.   

For longer term context, the large net reduction in GLD metal holdings shows in the longer term chart below. 

20130627 GLD LT

(Source:  GLD

GLD has seen extended periods of both negative and positive money flow.  For comparison, from September 16, 2008 to June 22, 2009 (about 9 months) GLD gold holdings increased by about 519 tonnes or 85% from roughly 614 to 1,134 tonnes held.  (Period visible in the graph above.)  


Gold or Cash to Preserve Purchasing Power?

Consider that the world’s central banks can, with a few keystrokes, print all the new currency they want to buy gold.  But not even one of the central banks can print even one ounce of gold with their magic computers. 




The Original
Vulture Speculator

Trading gold, silver and mining shares since 1980 with a focus on taking advantage of volatility extremes, Gene Arensberg analyses the markets through a basket of technical and fundamental indicators and shares his findings from time to time here at Got Gold Report. Mr. Arensberg has been quoted in the Wall Street Journal, Dow Jones MarketWatch, USA Today and dozens of other news organizations.

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