Wikinvest Wire

A new high at the gold ETF

Thursday, January 08, 2009

Inventory at the SPDR Gold Shares ETF (NYSEArca:GLD) made a new high on Tuesday at a whopping 787.88 tonnes after two small additions over the last week or so. This amount of bullion is greater than all but five of the world's central banks and the IMF.
IMAGE Traders and investors of all types continue to like the yellow metal as the financial crisis goes on and on, now in its 18th month.

It seems clear that the longer these "paper money" troubles persist, the more popular nature's money will become, a falling gold price (per the futures market) since the high of last spring failing to deter buyers.

The two most recent additions are shown in the far right of the chart below. It's been slow and steady since the fall when inventory rose and the price fell. The Gold ETF has been a pretty good proxy for physical demand as the inventory/price relationship seems to track demand in the coin dealer market.
IMAGE Since late-October, there have been ten additions, averaging about four tonnes each, and only two reductions of 0.2 and 0.3 tonnes. (Why did they even bother?)

This pales in comparison to the September-October period when there were 13 additions, averaging 13 tonnes each, along with 11 reductions averaging 7 tonnes.

A few months ago, the inventory-to-price ratio exceeded the one-to-one mark (i.e., tonnes in the trust per dollar of the gold price) as shown below. This ratio has recently dipped back below that mark but is headed higher again.
IMAGE A report in Bloomberg the other day cited estimates of an average gold price of $910 an ounce in 2009 with four of the twenty analysts predicting an average price of over $1,000.

There were quite a few bearish forecasts. Bullion dealer Kitco was included in this group (surprise!) along with JP Morgan (surprise again!) with estimated declines of between 6.3 percent and 11.8 percent from the 2008 average price of $873 an ounce.

It should be another interesting year - gold has posted gains for either the last seven years or the last eight years, depending upon which price you look at (there was a gain of 0.7 percent based on the London Fix in 2001, but the spot price fell by a similar amount).

Full Disclosure: Long GLD at time of writing.




But What do I Know? said...

Thanks for the info on GLD--does the IAU publish similar data, and does it matter (much smaller amount of gold held, perhaps)?

Do you have any thoughts on the relative merits of GLD versus IAU?


Tim said...

They probably do, but I've never looked for it. GLD is about ten times the size of IAU, so I've just always looked at GLD.
I've never compared IAU to GLD, but in the performance data that I have seen, they're always within a percentage point of each other.
I much prefer gold coins to any of these products - just pay the premium and stick them away somewhere, never having to pay any management fees again.

Mathlete said...


If you sign up (for free) at, you can download their Gold Investment Digest here:

It has a chart of all the ETFs combined, which looked to be 1000 tons at the end of September.

Tim said...

Yes, lots of good info at They also keep track of all the central bank holdings for like the last hundred years...

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