LAWRIE WILLIAMS: GLD adds massive 35 tonnes of gold Friday

If anything demonstrates the huge change of investor sentiment towards gold, the addition of a massive 34.93 tonnes of gold into SPDR Gold Shares (GLD), the world’s largest gold ETF on Friday provides an extremely strong demonstration  At Friday’s close the amount of gold held by GLD came to 799.03  tonnes – GLD’s gold holdings had fallen back to around 733 tonnes as recently as mid-May.

Indeed the massive single day increase in the GLD gold holding should not have taken gold followers by surprise given the big increase in the gold price over the past week, and reports that CEOs of some of the largest, and most successful, hedge funds had been going on record as singing gold’s praises.  The surprise had perhaps been that over the prior few days GLD intake had been somewhat muted given the gold price performance over the same period, but this had caused some observers to speculate that perhaps the ETF was having problems sourcing enough gold to match any recent increase in investment in the funds.  This seems to be a logical explanation and the eventual success in accumulating the additional gold has perhaps been one of the factors in gold’s recent strength.

Although, as we speculated on Friday, gold was not allowed by the big financial and political powers that be to end the week above the psychological $1,400 level, overnight trade in Asia, and this morning’s in Europe, has been pushing the gold price up towards the $1,410 level.  The big question now is will the American futures markets try to bring the price back down again when they open in just over 2 hours time.  If there is no immediate pullback then gold could easily be marked up to the $1,420s today and perhaps $1,500 by the end of the northern summer.

So far silver has been relatively unmoved by gold’s upwards progress.  The Gold:Silver ratio (GSR) has actually deteriorated as far as silver is concerned – closing on 92, the highest level for around 25 years.  As silver optimists we see this as a buying opportunity for silver.  Gold seems to have momentum currently and historically silver has outperformed gold when the latter is on the up and up.  The stronger leverage of silver suggests there could be some good gains to be made, but as we have warned before, silver often disappoints.  Not really an investment for the proverbial widows and orphans.  But at some stage silver will likely come good.  Definitely worth a punt if you are a gambler!

As we have stated a number of times recently, gold seems to have a lot going for it.  The Fed is under pressure to cut interest rates both from its own data assessments and from the U.S. President who has suggested a 50 basis point cut to get the U.S. economy back on track.  This would be a huge cut for a conservative U.S. Fed and if it should materialise gold would likely fly.  Geopolitical tensions are high in the Middle East and these could also provide a trigger for gold if there is further escalation.  Uncertain times tend to be good for gold!

24 Jun 2019

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London - recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com