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Albert Sung is the author of the Katchum Macro-Economic Blog, monitoring breaking economic news from a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at... More
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  • The Effect Of Gold ETF's On The Gold Price 4 comments
    May 18, 2013 8:20 AM | about stocks: GLD

    As demand is now being dictated for a part by the ETF's, we need to pay attention to what is happening in the trusts. Are they unloading their gold? Because if they keep unloading their gold, the demand from ETF's is going to decline, which has a negative impact on the gold price. This is the theory of supply and demand.

    You can monitor this chart daily at the SPDR gold trust site:


    (click to enlarge)

    Chart 1: SPDR Gold Trust: Units in the Trust (Red Chart, right axis)

    As I indicated here, ETF's were the largest sellers in gold, resulting in a 13% decline in the demand for gold. I cannot stress how important it is that ETF's keep buying gold. If they don't buy, like what happened starting in 2013, then the price of gold will decline. The great difference between 2013 and 2008 is that in 2008, ETF's were massive buyers of gold, while today they are massive sellers. Keep watching this trend. If it reverses, you can confidently start buying precious metals.

    Disclosure: I am long AGQ.

    Stocks: GLD
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Comments (4)
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    , contributor
    Comments (301) | Send Message
    Do you have any feel for how much ETF buying and selling is physical metal and how much is done with contracts and other paper transactions ?
    19 May 2013, 11:03 AM Reply Like
  • Katchum
    , contributor
    Comments (615) | Send Message
    Author’s reply » Daily share volume is 14 million for GLD. At $120/share. That's 1.7 billion dollars of trade per day. I would think this is the paper number.


    Physical gold takeoff in the trust of GLD is 5 tonnes a day. Or 180 million dollars a day. I think this is the physical number.


    So paper trading is 10 times the physical trading. Right? I have no idea if this is correct...
    19 May 2013, 11:28 AM Reply Like
    , contributor
    Comments (301) | Send Message
    For every share traded there is a buyer and a seller of the piece of paper so there is no net effect to the consumption of physical gold just someone who thinks it's worth more and someone who thinks it's worth less . Also is there really someone moving 5 tonnes a day back and forth across the street or is that just BS ???
    19 May 2013, 02:36 PM Reply Like
  • Katchum
    , contributor
    Comments (615) | Send Message
    Author’s reply » Yes, for example in the COMEX warehouses, sometimes there are moves of 400000 ounces of registered gold. That's 10 tonnes.
    19 May 2013, 04:30 PM Reply Like
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