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.
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.
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.
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).