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.

Physical Gold Liquidity Stretched, Are Central Banks Meeting the Supply Shortfall?

This week starts with a warning from China to the G20 calling for them to lead the global economy back to growth. But a look at the last 8 years of the G20’s failure to supply such leadership and the inactivity on that front and absence of any plans to promote such growth in the future makes such warnings rather pointless.

The Technical picture shows us that the latest period of consolidation appears to be ending ahead of the next strong move. With Friday seeing more physical gold being purchased after a sale, the time is right for another purchase. The question is, will it wait for the Bank of England’s announcement or hit the market on any ‘dip’ in prices before then?

The U.S. Jobs report on Friday was very good [but subject to re-adjustment in the days to come]. The effect on global markets was negligible and dissipated today. The feel of the market remains positive for gold and silver prices.

In India the monsoon is now 1% higher than the ‘normal’ level seen on average. If this continues demand for gold in India from the agricultural community will be as high as it has ever been.

As we said last week, the only restraint we see on the gold price is an Indian propensity to hold back when prices are rising strongly.

It was reported to the SEC that older bars are now being put into the Custodian of the SPDR gold ETF. It may simply be a market coincidence, but older bars are usually synonymous with central bank holdings. Is it possible that London’s liquidity levels are dropping to the point where central banks are propping up its liquidity level?

We must point out that when the U.S. SPDR gold ETF and others together with the U.S. banks sold gold from 2012 peaks to the heavy falls in April 2013 the gold sold did not sit in the developed world’s gold markets but made its way primarily through Switzerland [where it was refined into metric sizes] to the Far East [China in the main].

This meant it was not going to come back when demand was resuscitated again. The tonnages of gold bought back into U.S. gold ETFs is over 500 tonnes, in total, so far this year. With most previously sold gold not available and the bulk of gold supplied into the market continuing to be absorbed by the Far East, the additional amounts needed for this new U.S. gold ETF demand has to come out of a new source.

We have watched liquidity levels of gold in the markets drying up, assisted no doubt by the Chinese Bank [ICBC-Standard] which has taken over from Barclays as a sub-Custodian for HSBC [Custodian of the SPDR gold ETF]. So where is this gold coming from? Older gold bars are likely to come from older stocks thus increasing the strain on London’s gold liquidity levels.

 

 

  • Robert

    “It was reported to the SEC that older bars are now being put into the Custodian of the SPDR gold ETF. It may simply be a market coincidence, but older bars are usually synonymous with central bank holdings.”

    I’ve always found GLD’s claimed holdings to be a bit suspect. 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.”