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LAWRIE WILLIAMS: Gold ETF inflows up sharply in April – WGC

The gold price seems to be developing a pattern at the moment.  It opens higher in Asia, falls when Europe opens, picks up during the day, falls again when the U.S. opens but then drifts higher ending the days little unchanged.  It has been doing this for some days now suggesting a degree of control by the big money.  Plus ça change.

Indeed the seemingly regular price pattern, which again saw the end-week spot gold price being held below the $1,320 level, does seem to provide ammunition for those who believe the gold market to be manipulated by the powers that be.  Gold is perceived as something of a bellwether for the state of the economy – particularly that of the USA - and politicians and central bankers are not in favour of a supposedly independent counter which lays bare the true economic picture.  Some will say that the gold price is just moving in the opposite direction to the U.S. dollar index given that it is generally priced in U.S. dollars.  But the dollar index can be manipulated by the same entities so the gold price movement and that of the dollar index are effectively two sides of the same coin.

What all this means is that so far this year the gold price has been flat (which is a better performance year to date than many of the major stock market indices which have fallen back over a four month period for the first time in several years).  This has happened over a period when geopolitical and geo-economic factors might normally have been seen as gold price positive.  Some force, outside the norm, might just be exerting a steadying hand to ensure the gold price does not get out of control and thus alert what is usually a quiescent media that the state of the economy is not quite as rosy, or is arguably somewhat worse, than  many .governments would have us believe.

Conceivably one pointer which is less prone to, although certainly not exempt from, manipulation of this type, is investment globally in gold ETFs.  They do not impact directly on the gold price to the extent the gold futures markets do so could perhaps be seen as a secondary demand tier.  Transactions also tend to be in physical metal rather than the paper dealings on exchanges like COMEX where little, if any, physical gold actually changes hands.

The World Gold Council (WGC), which supposedly fights the corner for the global gold mining companies – although some like GATA might dispute this – follows these gold ETF figures quite closely given that it was effectively the first into the field in initiating the formation of the biggest gold ETF of all – GLD. 

The WGC has thus recently put out a report monitoring the latest global gold ETF inflows suggesting significant increases in April – 72.2 tonnes - the highest for over a year.   The prime areas where gold ETFs showed increases were reported as North America and Europe in terms of volume seemingly countering what had appeared to have been weak physical investment demand in these areas in terms of uptake in gold coins and bars reported elsewhere with respect to Q1.

The WGC goes on to note that these gold ETF inflows were steady throughout April even though the gold price retraced early gains, finishing the month 1% down, after reaching an intra-day high of approximately US$1,360/oz mid-month.  The WGC commented that global equities were mostly higher during the month, but many indices remained down or flat for the year. Market uncertainty stemming from missile strikes in Syria by the US, the UK and France, as well as continued trade war rhetoric cast a cloud over the markets. At the same time, higher inflation expectations and a weaker US dollar through April seem to have offset the negative effect of higher interest rates set by the U.S. Fed and the prospect of more rises in the pipeline.  These could well adversely affect equity prices too.  Since the end of the month though the dollar has seen something of a recovery and driving the gold price down in dollar terms so overall it is now at around the same level as it was at the beginning of the year.

14 May 2018 | Categories: Gold, Dollar

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