Lawrence Williams

About the Author Lawrence Williams

Former CEO of Mining Journal Ltd. and subsequently General Manager of Mineweb.com - a position relinquished in October 2012 to continue as a freelance writer. Graduate mining engineer from London's Royal School of Mines (part of London University) - has worked on gold, platinum and uranium mines in South Africa, copper in Zambia, uranium in Canada and holds a South African Mine Manager's Certificate. Joined Mining Journal originally as Financial Editor and worked for the company for over 30 years spending 13 years as CEO. Particular follower of the gold and platinum market and has written numerous articles on precious metals for Mining Journal and Mineweb and has also written for London's Financial Times as well as for other media and publications including SeekingAlpha. Has been regular writer for mineweb.com - and now has own blog - www.lawrieongold.com as well.

Surprise Sale From GLD and Strong U.S. Jobs Report Knocks Gold Price Back

Whenever you get that feeling that the way higher is free of obstacles, profit taking usually kicks in or a simple pause or consolidation comes in. That’s what’s happening now. While we had not seen any physical gold sales out of the gold ETFs we follow until now, the appearance of one dampens euphoria. Today, is an expression of that.

But when we look at the Technicals, the picture tells us that the price restraint will not last for long at all. Indeed, today may be seeing all that restraint disappear.

In the U.S. a much stronger than expected jobs report caused some wild fluctuations in the gold price with a knee jerk drive down to the $1,335 level before an almost equally rapid climb back to the $1,350s from whence the fall started.

On the fundamental side, we see Chinese demand starting to recover now. The news out of China that auto sales are up 19% confirms that Chinese middle class numbers are burgeoning, despite an overall slowdown economically. We focus on the middle classes because they drive Chinese demand for physical gold. With an estimated eventual 500 million Chinese middle classes on the way, the demand for gold will completely overwhelm available supplies.

In India markets are becoming euphoric, as the monsoon is now covering the entire country promising a strong rise in gold demand from that country too. With the U.S. demand for physical gold at levels last seen when gold was headed to its peak, the only restraint we see on the gold price is an Indian propensity to hold back when prices are rising strongly. They prefer to buy either on the fall or when a base is established.  But such caution is overwhelmed when it comes to your wife’s demands when a daughter’s wedding comes up [September to May].

In China gold investors buy when the disposable income is there, with the only restraint being how much that money can buy. This diminishes as prices rise, falling by the same percentage basis that gold prices rise.

In New York yesterday there was a sale of 4.158 tonnes from the SPDR gold ETF leaving its holdings at 978.286 tonnes. But there were no purchases or sales from or to the Gold Trust leaving its holdings at 213.19 tonnes.

What is a surprise, but shouldn’t be, is the sight of a sale of gold from the SPDR gold ETF. It’s not a small sale either. We are used to holders of the shares of this fund buying to hold for the long term, so the sight of the first sale of any significance for months, causes a surprise to all. But for there to be either a trader of a stale bull in this fund should be considered as a ‘normal’ market event.

 

  • Sierra_Intrepid

    “In New York yesterday there was a sale of 4.158 tonnes from the SPDR gold ETF leaving its holdings at 978.286 tonnes.”

    How reliable are GLD’s holding reports? GLD does not give retail investors the right to redeem for any of its mystery physical gold holdings. This fact alone ensures the GLD shares to be nothing more than paper at the end of the day. GLD also has a glaring audit loophole in their prospectus that states they have no right to audit subcustodial gold holdings. To this day, I have not heard of a single good reason for the existence of this backdoor to the fund. Some other red flags I’ve stumbled upon, verified and welcome everyone else to verify for themselves:

    “Did anyone try calling the GLD hotline at (866) 320 4053 in search of numerical details on GLD’s insurance? The prospectus vaguely states “The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody.” When I asked about how much of the gold was insured, the representative proceeded to act as if he didn’t know and said they were just the “marketing agent” for GLD. What kind of marketing agent would not know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors.

    I remember there was a highly publicized visit by CNBC’s Bob Pisani to GLD’s gold vault. This visit was organized by GLD’s management to prove the existence of GLD’s gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on the most recent bar list at that time. It was later discovered that this “GLD” bar was actually owned by ETF Securities.”