LAWRIE WILLIAMS: GLD Rising. Is this the move we’ve been waiting for?
In a post here a few weeks ago we suggested monitoring inflows or outflows of gold into or out of the big SPDR Gold Shares gold ETF (GLD) as a way of judging big money sentiment on gold (See: Watch GLD for gold price guidance) and for a corresponding gold price direction. And, after a series of consistent gold withdrawals from the ETF, this does seem as if it may have turned around sharply last week at almost exactly the same time as the big fall in the equities markets commenced. Last Tuesday, for example,8.82 tonnes of gold were added into GLD – the first increase since July - and after a couple of days of zero movement in the ETF, another 5.65 tonnes of gold were added into it on Thursday.
These are not insignificant amounts. 14.47 tonnes of gold is equivalent to the annual production of Sudan – the world’s 35th largest gold producer last year – and this amount was added only over a 4-day period. This week’s GLD figures will thus be particularly worth watching to see if the build-up continues – and if it does watch out!
Many observers have suggested that for a sustained increase in the gold price this would be accompanied by a significant downwards correction in the general equities markets which are seen by many as overbought, with such a correction perhaps overdue and inevitable. But beware of a really big downward move in equities should this happen, as some commentators suggest. Such an occurrence could bring precious metals down in price too as happened in 2008. The prospect of this may have lightened somewhat in comparison with the last big downturn as many institutions are out of any substantial precious metal holdings given they have been somewhat out of favour as an investable asset in the past several months. And even if they do drop in price alongside equities they will likely recover far faster – as in 2008/2009.
Equities markets this morning are mixed. Asian markets turned down sharply while European markets have been stuttering above and below unchanged. They may be waiting for a lead from the U.S.equities sector which opens before the European one closes.
15 Oct 2018