Gold News

GLD and IAU Gold ETFs Shrink to Pre-Covid Size as Price Hits 5-Month Low

CONTINUED selling of gold-backed trust funds saw gold prices hold at 5-month lows beneath $1900 per Troy ounce Friday, down $20 for the week as gold ETFs suffered their 4th consecutive week of liquidation by investors following 'hawkish' comments on inflation and interest rates from US central bank the Federal Reserve.
Global stock markets fell hard, down almost 1% for the day on the MSCI World Index, as bond prices continued to fall – driving borrowing costs higher – after Wednesday's release of minutes from the Fed's July interest-rate rise, with real interest rates in the US bond market holding near yesterday's jump to the highest since 2009 at 1.96% per annum on 10-year TIPS.
With gold priced in the Dollar falling overnight to $1885 per Troy ounce, the lowest since mid-March – eve of the SVB and wider mini-crisis in US regional banking – the joint bullion holdings of the GLD and IAU combined have shrunk to the smallest since March 2020, when the Covid pandemic starting in China went global.
Chart of Gold's two top ETFs Source: BullionVault via SPDR, iShares, LBMA
"Outflows from global gold ETFs continued in July but narrowed compared to June," says commentary from the mining industry's World Gold Council, reviewing last month's action.
"Europe led global outflows, closely followed by North America. [But] despite net year-to-date outflows [by weight] – virtually all from Europe – global gold ETF [values have] increased by 6%, supported by gold's strong price performance."
Contrary to gold ETFs, the giant silver-backed SLV trust fund did not change in size on Thursday, holding almost unchanged from last Friday after registering its first weekly inflow in 7 last week.  
Silver prices today held little changed for the week, down more than $2.50 per ounce to $22.75 from late-July's multi-month peak.
Back in gold, wholesale prices in Shanghai – the only legal entry-point for bullion into China, gold's No.1 mining, importing, central-bank buying and consumer nation – today showed a premium of more than $50 per ounce above global trading and storage hub London, a record incentive for new imports since the Shanghai Gold Exchange launched its daily benchmarking auction in 2016.
"Analysts...flagged the absence of new import quotas issued by the People’s Bank of China to commercial banks," says Reuters, reporting an issue first identified by BullionVault over a month ago, "contributing to the high premiums."
Ahead of the post-summer Hindu wedding season and then the key festival of Diwali in India, gold prices in the precious metal's No.2 consumer market meantime moved to a premium of $3 per ounce over official import costs this week, snapping a 2-month run of discounts.
"There is modest demand in the market since prices have come down," Reuters quotes one Kolkata wholesaler.
For financial traders, "China's economic woes remain in the spotlight, despite a mix of stimulus steps by authorities," says a note from Swiss bullion refining and finance group MKS Pamp.
This week's selling in gold ETFs saw the bullion price in Euros slip to €1745 per ounce, while the UK Pound price dropped Friday to fresh 2023 lows at £1480.


Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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