vrijdag 6 december 2013

GLD ETF Raid Slowing Down

The ETF outflows keep progressing, but this time at a slower pace. Half the pace we saw begin 2013. This should at least support gold prices going forward.

Chart 1
The most obvious reason is because of the low premiums in China (Chart 2). There is no arbitrage opportunity anymore today, while in May 2013 we had a higher premium in China. So at that time they could take delivery on GLD and sell it to the Chinese. Today it's more difficult.

Chart 2
So why do we still see these ETF outflows in GLD? We have these bears in the gold market that are responsible for this. Most ETF's are loss-making due to the declining gold price and fuel the ETF outflows.  But now that the gold price kind of stabilized at $1200/ounce, we should see a stable ETF stock going forward. We also see that shorts are covering, which is also stabilizing the ETF outflows. The key is China buying increasing amounts of physical gold and that should support prices. There is no way that the ETF outflows can continue, because China will keep buying more and more gold. The ETF's will start buying gold if the gold price bottoms out.

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