Gold price extends loss as Fed cuts rates, signals less easing
New forecasts showed several officials penciled in fewer rate cuts for next year than estimated.
Gold dropped to a near six-month low on Monday as the post-elections slump continues and financial markets try to make sense of what a Donald Trump presidency may mean for interest rates, economic growth and inflation.
Gold for delivery in December dropped to a session low of $1,212.00 an ounce, the lowest since the beginning of June in already heavy early morning trading on the Comex market in New York. Gold is now down more than $120 an ounce after an initial surge on Tuesday as results showed a likely Trump victory.
Gold bears are making big bets that Trump’s plans for fiscal stimulus, including a $500 billion infrastructure spending program, will lead to strong US economic expansion, higher interest rates and a number of prominent hedge fund managers and billionaires running family offices have moved aggressively out of gold and into stocks.
Gold bulls point to likely inflation arising from deficit spending by a Trump administration, burnishing gold status as a hedge against inflation and geopolitical uncertainty boosting gold’s allure as safe haven asset.
At the moment the bears seem to have the best of it. Since the election investors in top physical gold-backed exchange traded fund – SPDR Gold Shares (NYSEARCA: GLD) – have dumped a net 15.1 tonnes (buying on Wednesday, but offloading more than 20 tonnes on Thursday and Friday.
GLD vaults now hold 934.6 tonnes or just over 30 million ounces; worth $37.1 billion on Friday.
Investors in world’s number one physically-backed gold ETF – GLD – dumped 20.5 tonnes in two days
GLD’s holdings hit a 2016 high early July, but nearly 50 tonnes have been pulled from the fund since then, reducing the value of holdings by $5.5 billion as the gold price retreats. Year to date, holdings are up still up 290 tonnes.
GLD dwarfs other physically-backed gold ETFs holding more than 45% of the global total and after a few dismal years, GLD rise in assets under management in 2016 surpassed the banner years of 2009 and 2010 when investors caught in the global financial crisis and spooked by quantitative easing piled into GLD.
On August 22, 2011 when gold was hitting record highs above $1,900 an ounce GLD became the largest ETF in the world briefly surpassing the venerable SPDR S&P 500 trust at a net asset value of $77.5 billion.
Gold holdings in the trust would peak more than a year later in December 2012 at 1,353 tonnes or 43.5 million ounces. Global ETFs hit a record 2,632 tonnes or 93 million ounces of gold at the time.
2 Comments
Ben
“GLD vaults now hold 934.6 tonnes or just over 30 million ounces; worth $37.1 billion on Friday.”
Frik Els, I keep seeing you make these claims but I’ve yet to see you provide any substantial evidence to support them. 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.”
ghartwell
Thanks, Ben, for those wake up comments.