Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Gold continued its retreat from 13-months highs to trade below $1,250 an ounce on Monday, but the pullback only convinced investors in physical gold-backed ETFs to pour in more money.
On Monday gold bulls bought a net 2.7 tonnes in industry bellwether SPDR Gold Shares (NYSEARCA:GLD) which represents more than 45% of holdings in gold ETFs around the world. Over the last five days inflows topped 31.5 tonnes.
The fund has only experienced six days of net redemptions this year
Last week GLD saw $1.4 billion worth of inflows in just a single day after a jump in the gold price combined with investors buying the equivalent of 11.9 tonnes. The fund which was launched in 2004 has only experienced six days of net redemptions this year and is worth $10.9 billion more than at the start of the year.
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, representing half the ETF gold held around the world.
Global vault holdings have swelled to over 1,800 tonnes, an 18-month high following net inflows of more than 330 tonnes so far this year. This year has seen a definite reversal of the trend during the last three years when a staggering 1,198 tonnes left funds.
Despite the softer trend over the past couple of days gold is still experiencing one of its best starts to a year in decades. Gold is up 17.4% year to date thanks to safe haven buying as investors seek cover from turmoil on financial markets, fears over the economic outlook and the push by central banks around the world into unprecedented negative interest rate territory.
2 Comments
ERTguy
Gold is getting ready for take off. Pretty soon there isn’t going to be any available on the market at this rate. Very limited supply is about to get even more so in the coming days
Mr. L
“On Monday gold bulls bought a net 2.7 tonnes in industry bellwether SPDR Gold Shares (NYSEARCA:GLD) which represents more than 45% of holdings in gold ETFs around the world. Over the last five days inflows topped 31.5 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 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.”