Gold News

Gold ETF Selling Now Ended?

Gold sales from the big ETFs added 880 tonnes to supply last year...
 
In 2013, the hope that the economic recovery would gain traction in the US caused a persistent trend of selling gold from US-based exchange-traded trust funds, writes Julian Phillips at The GoldForecaster.
 
Last April, after Goldman Sachs forecast a heavy fall in the gold price, investor selling of these ETF shares led the trusts to unload around 400 tonnes of physical gold into the market in short time. The gold price buckled as a result. It pulled back to $1180 by end-June, and then recovered above $1200 over time in the face of many forecasts that it would fall to $1000 an ounce.
 
Across the whole of 2013, persistent heavy selling from gold ETFs amounted to 880 tonnes. Institutions sold gold from these funds to turn to what appeared to be a far better prospect of profits. How do we know that it was financial institutions that were sellers? Because it was at the creation of these gold ETFs that allowed financial institutions to buy gold almost directly at cheap normal brokerage rates. Before that, they could not own gold bullion. With the gold ETF issuing shares against purchases of gold bullion, suddenly this market was opened to them. The tonnage sold through the year was around 20 to 30 tonnes a week. 
 
In total, the US supplied around 1,300 tonnes over the course of 2013. With total newly-mined gold supply at 2,969 tonnes and recycled gold supply at 1,371 tonnes – totaling 4,340 – the additional 30% supply from the US took supply up to 5,640 tonnes.
 
But at the end of 2013, the supply from the US slowed to a trickle and looks like drying up now. While the focus of US investors in the gold market has been switching out of gold in the expectation it would fall further in price, most overlooked the fact that these funds would have a finite amount of gold to sell.
 
Many investors in these funds are very long-term holders and will not contemplate selling their gold. The profit-seekers appear to have completed their sales now, and we're seeing US investors starting to buy gold back into these funds. The conclusion is that we're very close to if not at the point where the gold market has lost a 1,300 tonnes line of supply – huge for the market. This fact alone is changing the structure of the gold market and, we think, taking the gold price back to an uptrend.
 
Please note that we haven't mentioned what's happening and is expected to happen on the demand side.

JULIAN PHILLIPS – one half of the highly respected team at GoldForecaster.com – began his career in the financial markets back in 1970, when he left the British Army after serving as an Officer in the Light Infantry in Malaya, Mauritius, and Belfast.

First he worked in Timber Management and then joined the London Stock Exchange, qualifying as a member and specializing from the beginning in currencies, gold and the "Dollar Premium". On moving to South Africa, Julian was appointed a macro-economist for the Electricity Supply Commission – guiding currency decisions on the multi-billion foreign Loan Portfolio – before joining Chase Manhattan and the UK Merchant Bank, Hill Samuel, in Johannesburg.

There he specialized in gold, before moving to Capetown, where he established the Fund Management department of the Board of Executors. Julian returned to the "Gold World" over two years ago, contributing his exceptional experience and insights to Global Watch: The Gold Forecaster.

Legal Notice/Disclaimer: This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Gold Forecaster/Julian D.W. Phillips have based this document on information obtained from sources they believe to be reliable but which it has not independently verified; they make no guarantee, representation or warranty and accepts no responsibility or liability as to its accuracy or completeness. Expressions of opinion are those of Gold Forecaster/Julian D.W. Phillips only and are subject to change without notice. They assume no warranty, liability or guarantee for the current relevance, correctness or completeness of any information provided within this report and will not be held liable for the consequence of reliance upon any opinion or statement contained herein or any omission. Furthermore, they assume no liability for any direct or indirect loss or damage or, in particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this report.

See full archive of Julian Phillips.

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