Monday, November 17, 2008
There was a story out last week in the Gulf News about unprecedented gold buying in Saudi Arabia during the first half of November. According to the report, 13 billion Saudi riyals worth of the metal have been purchased in recent weeks - about $3.5 billion or roughly 140 tonnes at today's prices.
A quick check of the SPDR Gold Shares ETF (NYSEArca:GLD) shows no similar buying over this time. In fact, the world's most popular gold ETF has been noticeably quiet during this period, with just 0.3 tonnes exiting the trust earlier in the month, barely noticeable in the chart below.
It also looks like there's another little wedge pattern forming at around $740 an ounce.
This report by Peter Cooper at ArabianMoney.net, which also appears at Seeking Alpha, lends some credibility to the story in the Gulf News, one of the leading English-language newspapers in the region:
I can not verify the source but all I can say is that this has the hallmarks of a genuine story, based on my 25 years in financial journalism. First, it was buried on an inside page and the amount was given in UAE currency later in the story - hardly the action of somebody looking to manipulate the gold price, more an indication that the sub-editors did not understand the importance of this story.With local stock markets faltering badly and the property market in Dubai and elsewhere beginning what might be a truly spectacular fall, it makes sense that wealthy individuals would seek out more secure assets during this time of uncertainty.
Second, this is how the best stories emerge from Saudi Arabia - the market is not very transparent but insiders do notice big changes and pass this information on, and it surfaces as well sourced rumor. I am afraid this is about as good as it gets in the Middle East.
Curious to see what this two-week purchase would look like when laid up against the inventory at the Gold ETF which, incidentally, just celebrated its four year anniversary, the chart below was created with the recent Saudi purchases indicated in yellow.
The 140 tonnes recently purchased in Saudi Arabia amount to about one-fifth the inventory that took four years to accumulate at the Gold ETF.
That's a lot of gold in a very short period of time.