Gold News

Gold Price $2000 'Driven by OTC Inflows' Not ETFs or Comex Specs

GOLD PRICES rallied from their deepest dip below $2000 in 2 weeks on Tuesday, defying weak gold ETF trust fund flows as global stock markets rose on better-than-expected GDP data from China.
The world's 2nd largest economy expanded by 4.5% per year in the first 3 months of 2023, just below the Communist dictatorship's new target of "around 5%" but above consensus forecasts for Q1 of 4.0%.
Gold prices in Shanghai today slipped for a 2nd session in Yuan terms, but extended their premium over global quotes for London settlement towards $7.75 per ounce, the highest in a week and back in line with the typical incentive for new imports of bullion into gold's No.1 consumer nation.
Monday's drop in Dollar gold prices to $1981 per ounce saw giant gold ETF the SPDR Gold Trust (NYSEArca: GLD) shrink by 0.2%, reaching its smallest size since in 3 weeks.
Smaller competitor the iShares product (NYSEArca: IAU) expanded, in contrast, as did the 3rd and 4th largest North America-listed ETF gold-price trackers the Sprott Physical Gold Trust (NYSEArca: PHYS) and the SPDR Minishares product (NYSEArca: GLDM). 
Together, however, those 4 gold ETFs have now expanded by only 0.4% since end-October, when gold prices hit 31-month lows before rising 21.7% to Monday's London close.
Chart of 4 largest North America-listed gold ETFs by size vs. Dollar gold price. Source: BullionVault
"Given what gold has achieved in 2023 in the face of much larger macro headwinds and the lack of a frenzied bid [from Comex speculators]," says strategist Nicky Shiels at Swiss bullion refining and finance group MKS Pamp, "[our] suspicion [is] that physical demand...stemming from both retail and central banks as well as 'unknown' the key differentiator now" versus gold's 3 previous pops above $2000 per ounce.
On Shiels' analysis of the available data, gold inflows from central banks and investment funds "should" have driven gold prices up 4.4% year-to-date. So gold's 10% rise since New Year offers "substantiation" that large-bar demand in the wholesale over-the-counter (OTC) market "is driving price action".
In contrast to untracked OTC investment demand, the GLD gold ETF (which costs 0.40% in annual management fees) has shrunk by 2.0 tonnes so far in April, while the IAU (0.25%) has expanded by 6.2 tonnes, with Sprott (0.35%) growing 0.7 tonnes and the Minishares product (0.10%) up by 2.1 tonnes.
Since their respective all-time peaks, the GLD has now shrunk by 31.5% and the IAU by 15.7% while PHYS and the GLDM have expanded to lifetime records.
With spot gold bullion prices dipping back to $1999 early Tuesday afternoon in London, silver prices also held lower for the week so far following the past month's steep gains, trading just 10 cents above $25, down by $1 per ounce from Friday morning's fresh 12-month high.

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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