There has been quite a turnaround in the reported gold holdings of the world's largest gold ETF - SPDR Gold Shares (NYSEARCA:GLD). After some 24 tonnes was sold out of the ETF in January there has been a huge reversal in the current month. Holdings had remained flat at 799.07 tonnes for the final four trading days in January, but since then GLD has added a massive 27.88 tonnes of gold to a total holding of a fraction under 827 tonnes signifying quite a turnaround in gold investor sentiment. Over the same period the gold price has risen from $1,194 to the current $1,240 an ounce which will in part have been because of the change in sentiment triggered by the GLD inflows. Gold is currently at its highest price level since early November last year, although still has a long way to go before matching last year's peak in the mid $1,360s.
As noted in a recent article: Gold - thriving on uncertainty virtually all of the change in sentiment, and corresponding rise in the gold price and in the GLD holdings has come about since Donald Trump was inaugurated as President of the U.S. on January 20th. On that date gold was at $1,210 and the level of GLD gold holdings 809 tonnes. Initially, after the Trump inauguration both the gold price and GLD gold inventory fell back, but once the controversy over some of President Trump's initial spate of Executive Orders became apparent, it was all change as far as gold and GLD were concerned.
So where do we go from here? It seems unlikely that President Trump's shoot-from-the-hip style of tweet first and refusal to backtrack afterwards will change in any meaningful way. Those who elected him would probably not want this to happen in any case, but it may take the rest of the world some time yet before it understands that conciliatory diplomacy does not seem to be the Trump style.
While President Trump's domestic policy is what has come to the fore so far, in truth what the President has implemented to date will probably have little economic impact on the domestic economy, although it may have generated considerable vociferous opposition. It's what he may do next which is creating the real uncertainties, and key amongst all of this will be his China policy. What will be unnerving investors is that if he follows through on his campaign rhetoric, and so far he has been following that almost to the letter, America is headed for confrontation with China - economic and political almost certainly, and militaristic possibly.
All these paths hold considerable dangers for the US. China has the capability of retaliation on the economic and political fronts and while its weaponry may perhaps not be a match for the U.S. should there be a military flare-up in the South China Sea any U.S. operations would have long supply lines, while China would definitely have home advantage. It is also perhaps questionable whether the U.S.'s regional allies - notably Japan, Taiwan and South Korea would be happy at being drawn into a potential conflict with the Southeast Asian superpower.
Gold has broken up through its 100-day moving average and, at the time of writing is heading higher. It has moved through what had been seen as resistance at the $1,235 level and, depending on the Appellate Court decision expected this week on the legality of the currently halted ban on access to the U.S. on nationals from seven mostly-Muslim countries, it could continue to move higher. Whatever the Court decision at this level, there is the likelihood that the argument will yet end up in the Supreme Court before being finally decided.
With reports today that Stan Druckenmiller has reversed his sell-gold stance' which immediately followed the Trump nomination success and proved to be a good call, his funds are back buying gold again, which may be at least part of the reason we have seen the recent big gold inflows into GLD.
If the change in sentiment towards gold continues - and the levels of uncertainty are such that it well may - GLD could add more gold over the weeks and months ahead. So far its price is up by around 8% year to date and while this kind of advance is likely to be dwarfed in a rising gold price environment by the better gold and silver mining stocks (See: 2017 Predictions - Gold, Silver, PGMs, The Dollar, Markets and Geopolitics.) it could be considered a way of holding gold without having to take delivery of the metal itself as the price change more or less parallels that of gold bullion itself.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.