After plummeting last year in an extreme once-in-a-lifetime orgy of selling, GLD’s holdings have remained stable all throughout 2014.
That’s despite the fierce headwinds of the levitating stock markets continuing to howl, and the recent gold sentiment wasteland of the summer doldrums. GLD holdings' resiliency is very bullish.
As these lofty stock markets inevitably sell off, stock traders will return to GLD. Their necessary GLD-share buying to re-diversify unbalanced stock portfolios will add big marginal gold investment demand.
Quiet amid the macro rumblings of the last 24 hours, gold all of a sudden gets jiggy, popping 0.8% to $1,383 per ounce, the highest price since September.
The move comes as talks between John Kerry and his Russian counterpart Sergei Lavrov enter a third hour.
Putin is prepping to "invade eastern Ukraine," says Estonian Defense Minister Urmas Reinsalu. "The Russian Federation only accepts force ... A clear message needs to be sent that an attack will cost the aggressor dearly.”
Gold (GLD +0.3%) isn't moving much on this risk-off day, but Newedge's Robbert van Batenburg thinks the Chinese jitters which may be contributing to today's selloff could accelerate in the coming weeks.
"Chinese authorities have initiated a number of measures to reign in the froth in the domestic credit markets and speculative capital," he says, taking note of banking regulators requesting inventories of subprime loans and derivative positions, and today's story of Chinese banks cutting lending to industrial firms by up to 20%.
"The 2008 financial crisis has taught us that excessive leverage has to potential to create systemic risks if a virtuous credit cycle turns vicious. If these problems in China escalate, a flight in gold and Treasuries is likely to ensue."
A moderate global equity selloff is today's excuse, but something about buying the rumor, selling the news comes to mind as gold gains another 1.4% this morning to $1,365 per ounce, its highest level since last fall. Gold's big move began late last year as the Fed initiated the taper, and continues in 2014 as the central bank presses forward with the wind-down, and trots out a few on the FOMC to float the chance of rate hikes as soon as early 2015.
A check of asset markets following what's currently being interpreted as a strong nonfarm payroll report (175K jobs added vs. 154K expected; UE rate up to 6.7%): Flat ahead of the number, stock index futures are up by 0.5%; gold is down 1.1%, silver down 3.2%, copper off 2.9%; the dollar is up a bit, but mostly against the loonie after a weak jobs number in Canada.
"Instead of a multi-year downtrend, with disinvestment putting pressure on prices over time, many of the variables that drive gold prices (lower in 2013) have already reset to an extent," says Nomura, boosting its gold target to $1,335 this year (it's at $1,338 right now) and $1,460 in 2015 from $1,138 and $1,200, respectively. Silver's target is raised to $21.52 from $16.25 (silver's at $21.21 right now).
ETF outflows are slowing, speculative short positions have cooled, and producers are cutting back new projects. "Long-term demand support from Asian nominal income growth, an evolving post-QE macroeconomic environment and lower disinvestment potential move our gold equilibrium model to now expect price increases over the next three years."
The team also has a variant take on what might have caused last year's big decline in price, attributing it maybe to an arbitrage opportunity between Chinese and London pricing. "The potential for such negative supply swings has far less potential impact than in late 2012."
Major U.S. stock index futures are all off about 1% as the chance of military conflict in Eastern Europe builds following Russia's seizing of control of Ukraine's Crimean peninsula.
"[An] incredible act of aggression," says Secretary of State John Kerry as he heads to Kiev to show support for the new Ukrainian government.
Gold has its tail way in the air, up 1.6% to $1,344 per ounce, and money is also flowing into U.S. Treasurys with the 10-year yield off five basis points to 2.60%. WTI crude oil is ahead 1.5% to $104.16.
A draft research paper from Stern Professor Rosa Abrantes-Metz and Moody's Albert Metz finds from 2004 on, frequent spikes (usually down) in spot gold prices around the time of the 3 PM London time call to set the afternoon fix. These price movements weren't observed during the morning gold fix call, nor were they apparent prior to 2004.
“The structure of the benchmark is certainly conducive to collusion and manipulation, and the empirical data are consistent with price artificiality,” they say in the still-unpublished study (Bloomberg's Liam Vaughan reports).
At the moment, they say there's no clear reason why the patterns didn't begin until 2004, or why they're more prevalent in afternoon action, or why the moves tended to be downward.
Short of panicky outflows tomorrow, the SPDR Gold Trust (GLD) is set to record its first monthly inflow since December 2012. The fund has added 10.5 tons to reserves thus far this year amid a rally in gold prices after losing over 550 tons in 2013.
Overall gold ETF holdings, however, are up just 7.3 tons this year, meaning there's still net drawdowns outside of the GLD.
Gold continues to meander around a 4-month high, currently trading at $1,330 per ounce.
Up 1.1% to $1,338 per ounce, gold takes out a new YTD high - with the GLD now ahead by 11% for 2014 - but the team at Morgan Stanley is a seller of the rally.
Calling the move an overdue bounce following five quarters of declines and heavy ETF outflows, Morgan says the metal is still held hostage by rising real interest rates and the strong greenback. The team also notes one conspicuous feature of the "bounce": Relatively low volume.
Morgan's forecast for gold is $1,160 this year and $1,138 in 2015, both below the estimated $1,200 marginal cost of production.
The 9-day run higher for gold (GLD -0.4%) is the longest since July 2011, and - while it might be attributed to a hawkish vibe from the FOMC - the metal was lower going into the minutes.
BTIG's Dan Greenhaus cautions against reading too much into "few" suggested rate hikes "relatively soon." A "few" may indeed want that given the move higher in equilibrium rates, says Greenhaus, but others on the FOMC argued (and won) that standard policy tools don't apply now. "Focusing on the former without the context of the latter makes for an incorrect analysis."
On the heels of more than a 4% rise in the price of gold this week, the SPDR Gold Trust (GLD +1.3%) saw a spike in gold holdings to 25.925M ounces as of Thursday, up 0.9% from the day before and the highest level since December 20.
In the last month, says Julian Phillips of GoldForecaster.com, there have been so sales from the GLD and more than 500K ounces of purchases. “This is tremendously significant because sales of physical gold from these U.S. gold ETFs and from the leading U.S. banks totaled 1,300 metric tons in 2013 ... This formed a key source of supply for gold. All of it went east to Asia never to return again.”
“The reduction in supply from the U.S., as these sales have now halted, is the prime reason the gold price is now rising,” he says, adding that it has nothing to do with U.S. economic factors.
"We continue to expect further gains over the course of 2014, helped by strong demand from China and an eventual easing of the import ban in India," says Capital Economics' Julian Jessop. "In the meantime, safe-haven demand for gold has revived a little as a result of the turmoil in emerging markets.”
Up 1.2% to $1,315 per ounce, gold is ahead more than 4% on the week and over 9% YTD. The metal has also crossed its 200-day moving average, which could force technical buying, writes the team at Commerzbank.
The $1,200 level is one of strong support, says Jessop, noting it's where gold stabilized during its bear market last year and it's at that price where a significant number of gold mines become unprofitable. He continues to forecast a price of $1,450 for year-end.
Also having a big day is silver, up 3.4% to $21.08.