World Gold Council Throws Water on COMEX Rumors

Always a sucker for a good chart, particularly when it involves precious metals, the one below in the most recent Gold Investment Digest from the World Gold Council is a doozy.
The trade group's first quarter report on gold has some rather interesting statistics related to the quickly changing supply and demand situation.

As shown above, inflows to the many gold ETFs around the world have been brisk:

Investors bought 469 tonnes of gold via this channel, dwarfing the previous record, of 145 tonnes, set in the third quarter of last year. SPDR®Gold Shares (“GLD”) enjoyed the bulk of the inflows. The total amount of London Good Delivery bars held by the Trust increased to 1127 tonnes at the end of Q1 09, from 780 tonnes at the end of last year. The two Swiss listed gold ETFs (the ZKB Gold ETF and the Julius Baer Physical Gold Fund) enjoyed the next strongest inflows, rising by 37 tonnes and 32 tonnes respectively. Inflows into the gold ETFs continued to grow throughout the quarter, despite the downward correction in the gold price, indicating that, as in past price corrections, ETF holdings tend to be “sticky”.

It's kind of ridiculous just how big the SPDR Gold Shares ETF (NYSEArca:GLD) has become when compared to the nine other funds and they have certainly characterized the inventory correctly in light of recently faltering prices - "sticky" is the right word.

As noted here yesterday, just 23.2 tonnes of the almost 350 tonnes added earlier in the year have exited the trust as the gold price declined from almost $1,000 an ounce in early February to current prices of just over $900.

They had this to say about the many and varied rumors about trading on the COMEX:

The quarter was beset with stories either urging investors to take delivery of, or claiming investors had taken delivery of, large amounts of gold from COMEX, driven by widespread shortages of gold in the spot market. Some claimed that the COMEX warehouses might therefore run out of gold.

The reality was quite different. While there were (at times severe) shortages of coins and small bars during the quarter, there was no shortage of London Good Delivery Bars, the main trading vehicle in the global over-the-counter market. And with respect to COMEX stocks, both registered stocks on COMEX (gold which meets the standards for delivery and for which a receipt from an exchange-approved depository or warehouse has been issued) and eligible stocks (gold which meets the delivery standard but for which no receipt from an exchange-approved warehouse has been issued) increased over the quarter, to 2.94 million ounces and 5.94 million ounces, from 2.83 million ounces and 5.71 million ounces respectively. This took total COMEX stocks as a percentage of long positions to 38%, which is high by historical standards, rather than indicative of stocks that have been depleted by a run on physical gold at COMEX.

Geez... The folks at the World Gold Council should really get a hold of some of the officials over at the National Association of Realtors (NAR) to see how an industry trade group is really supposed to operate.

Here's a perfect example where they could add to the fervor over rising gold prices by citing some shoddy statistics about how the supply of gold is limited and "it's a good time to buy" but, instead, they pour cold water on one of the biggest stories this year in the gold community, about the goings-on at the CRIMEX.

Maybe former NAR chief economist David Lereah could be hired as a consultant to help out.

The Gold Investment Digest goes on to discuss such important topics as gold's correlation with other asset classes, jewelry demand, mine supply, and central bank sales.

If you've never thumbed through this quarterly report, it really is worth a look.

Registration is required at the World Gold Council website to get a copy, but it's free.

Comments

[Mutual Fund...:]

Check with Jim Cramer, he usually has a rant ready on any given subject. Oh, did I mention that he's wrong most of the time?

Doug T.....The mutual fund guy
25% invested in precious metals and holding
www.mutualfundwealth.com/

Apr 30 04:11 PM

[Russell Ups...:]

Cramer changes positions on stocks so often it's like he's performing a financial version of the Kama Sutra.

Apr 30 05:59 PM

[InvestBaboo:]

Let us look at what investors are actually doing with Gold not what they are saying they will do with Gold. That is because if we go by what everyone is saying they will do with Gold we sholuld be over $2000 an ounce by now.

Oops! Gold is still a sell on both daily and weekly charts. Maybe it will hold its value, maybe it won't, but there are better places to make a few bucks than have it stashed it in Gold. My gut feel (which I have learnt not to trust unless I am playing poker because it has been wrong 90% of the time when it comes to investments) tells me Gold will someday go to $2000 but my chart reads tell me it is not a good investment at this time! So I have made myself a deal -- when Gold shows a strong buy on BOTH daily and weekly charts I will then invest in Gold. Sure, unlike many goldbugs I will miss the first two hundred dollars of rise but will catch the remainder one thousand dollar ride safely and surely and not losing sleep in the night.

Apr 30 09:13 PM

[Speedspirit:]

If and when Gold starts its upward trend you will be too late. It will be the physical Gold you will need. Do you have insurance car/life/fire then you might want some reality insurance, BUY Gold and Silver and keep it in a safe place.


On Apr 30 09:13 PM InvestBaboo wrote:

> Let us look at what investors are actually doing with Gold not what
> they are saying they will do with Gold. That is because if we go
> by what everyone is saying they will do with Gold we sholuld be over
> $2000 an ounce by now.
>
> Oops! Gold is still a sell on both daily and weekly charts. Maybe
> it will hold its value, maybe it won't, but there are better places
> to make a few bucks than have it stashed it in Gold. My gut feel
> (which I have learnt not to trust unless I am playing poker because
> it has been wrong 90% of the time when it comes to investments) tells
> me Gold will someday go to $2000 but my chart reads tell me it is
> not a good investment at this time! So I have made myself a deal
> -- when Gold shows a strong buy on BOTH daily and weekly charts I
> will then invest in Gold. Sure, unlike many goldbugs I will miss
> the first two hundred dollars of rise but will catch the remainder
> one thousand dollar ride safely and surely and not losing sleep in
> the night.
>

Apr 30 10:16 PM

[doubleguns:]

I noticed that there was a severe shortage when trying to buy silver. Still has a large markup over spot. That would indicate that the price is expected to go higher but I am still waiting, but I am waiting WITH both gold and silver IN POSSESION.

Apr 30 11:10 PM

[History Buf...:]

Doubleguns,

You can get silver coins but there has been a substantial markup for as long as I have been tracking them. I ended up paying close to $3 extra per coin over the spot silver price when I ordered a bunch of Canadian Silver Maple Leafs from a company in Oklahoma. I still feel better knowing I have the coins.


On Apr 30 11:10 PM doubleguns wrote:

> I noticed that there was a severe shortage when trying to buy silver.
> Still has a large markup over spot. That would indicate that the
> price is expected to go higher but I am still waiting, but I am waiting
> WITH both gold and silver IN POSSESION.
>

Apr 30 11:37 PM

[Homer II:]

Hoo-hum. I am stocking up on garden hose, because there is sure to be a real shortage this summer when the heatwaves hit us.

May 01 01:06 AM

[Sakata:]

I buy from them a lot but watch for their sale prices. They have had ASEs, Maples and Philharmonics on sales recently but the big one was the 99 cent sale at the beginnning of the month. I picked up 100 5oz bars for only $12.96/oz. I could sell them on EBay right now for a profit, even after Ebay's stiff fees. If you have the patience, Apmex is the place to buy and they have excellent customer service. I have never had any problems with several order over the last 6 months.


On Apr 30 11:37 PM History Buff 24/7 wrote:

> Doubleguns,
>
> You can get silver coins but there has been a substantial markup
> for as long as I have been tracking them. I ended up paying close
> to $3 extra per coin over the spot silver price when I ordered a
> bunch of Canadian Silver Maple Leafs from a company in Oklahoma.
> I still feel better knowing I have the coins.

May 01 06:31 AM

[rick12345:]

For those of you who are not familiar with the corrupt workings of the IMF, I'll give you a little insight. In it's attempt to keep the US dollar from becoming virtually worthless against the Euro and Yuan, lately the IMF have been selling gold at ridiculous prices, usually about $10 below the market value. This can have the effect of seriously undervaluing the price of gold, rendering it a less attractive investment than say the equities market. Subsequently, most people are less inclined to put their hard earned money into gold, particularly if they see their investments declining.
In any other market this would be seen as manipulation, and thus illegal, however here they are getting away with it because the gradual price drops are not seen as "significantly" affecting the overall gold price. Eventually however they will run out of reserves, and the market will ultimately prevail.

May 01 07:12 AM

[Vuke:]

The WGC is correct. There is no shortage of gold. What there is though, is a surplus of paper chasing it. And buyers want it cheap.

"Bad money drives out good", says Gresham's Law, the corollary of which is that good money appears only when necessary. It's in no one's interest to have gold run up wildly in price only to decline, so a well-ordered rise is the likely scenario for gold until some consensus is reached as to its value vis-a-vis paper. That value should be much higher than it is trading at today.

May 01 08:59 AM

[chux08:]

"So I have made myself a deal -- when Gold shows a strong buy on BOTH daily and weekly charts I will then invest in Gold."


Call what you want but you admit here to being a price chaser?? Which is the COMPLETELY BACKWARDS way to buy gold. No wonder you don't like gold!! Try this....when the price is going down, BUY gold. And when the price is going up, SELL some of your gold. I know it sounds easy but unless you have the ....training AND the mindset, you'll NEVER succeed in trading gold. How does one get that? Start with a good teacher. Like this guy here:
gracelandupdates.com

May 01 10:27 AM

[realold:]

I think that this is an extremely difficult time to make economic predictions. For inflation hedging, I would suggest buying some small percentage (of your portfolio) of gold or GDX and just forget about it in the short term. I don't see that physical possession of 100 oz bars of silver will do much good in a real crisis - what will you do, hack off a piece? Better to have dried food in that case.

I admit that having physical possession of some gold coins "feels" good, but I have also tried the mass silver route before, and it is just a pain.

May 01 02:32 PM

[TERN:]

Where physical stocks are being depleted is in the Platinum and Palladium markets. Auto sales in China are up.

These metals are a more interesting play on an economic recovery than gold.

May 01 09:59 PM

[kohalakid:]

Freya----

Why don't you try some 1000 oz bars if you want real value.

Anything at more than 25 or 30 cents over spot is not worth the effort.

May 04 02:27 PM

[Freya:]

rick12345: India had its first of 2 annual Gold Festivals last Monday. At the end of the day, sales were so poor that all of the merchants were selling gold at a Discount trying to get it out of inventory.

They must have learned this tactic from the IMF.

May 02 01:20 PM

[Freya:]

Speedspirit: Gold is your Insurance, Keep it and never let it go".

Silver is an Industrial play and likely to move up faster than Gold. Why bother with silver coins, buy 100 oz. bars.

May 01 01:23 AM

[Freya:]

There is always a Conspiracy somewhere.

Live by the Conspiracy, die by the Conspiracy.

Apr 30 04:25 PM