Gold Swoons 1% After Biggest GLD Inflow Since 2011 Top, Silver 'Outperforms' as ECB Seen 'Disappointing' on QE Thurs
Wednesday, 1/21/2015 15:31
GOLD PRICES sank 1% in 15 minutes as New York opened Wednesday and trading in the $30 billion SPDR Gold Trust (NYSEArca:GLD) began after the largest inflow of investor money since gold's summer 2011 peak.
Having hit new 5-month highs at $1304 per ounce, the gold price also fell swiftly for non-Dollar investors, dropping 1.3% against the Euro, which rallied on the FX market ahead of tomorrow's policy decision from the European Central Bank, widely expected to launch QE asset purchases.
That still left gold 9% higher in Dollars and 13% higher in Euros from the start of the month.
Silver prices also fell hard in afternoon trade Wednesday in London, but held nearly 15% higher for 2015-to-date against the Dollar.
The gold needed to back GLD shares – the largest exchange-traded fund 3.5 years ago, valued at $77.5bn – yesterday grew by another 11.5 tonnes.
That took its growth since the Swiss National Bank shocked world markets by
de-pegging the Franc from the Euro last week to the strongest 3-day run since May 2010 by weight and February 2009 by percentage.
Totalling some $1.4 billion, inflows to the GLD since Thursday have been stronger than any 3-day period since August 2011.
"Flight to quality continues," reckons a note from Commerznbank in Germany, "with more money pouring into metals ahead of the ECB meeting on Thursday."
"Total [GLD] holdings are still remain not very far off a 6-year low," says Swiss finance and refining group MKS's Asian desk.
Price-wise however, "silver is the best performing precious metal this year, outshining gold by some distance," MKS adds.
Holdings in the largest silver ETF – the iShares Silver Trust (NYSEArca:SLV) – yesterday held at 6-month lows, down 7% by weight from the recent peak of late November.
"Silver has outperformed against gold," agrees Japanese trading house Mitsui's Hong Kong team, "and that outperformance looks likely to continue" with the Gold/Silver Ratio "trending towards 70-71 levels" after hitting 5-year highs in late 2014 above 75 ounces of silver to 1 ounce of gold.
"The platinum group metals showed less convincing bullish sentiment," says Mitsui's analyst David Jollie in a separate note.
Gold held above platinum prices for a third day running on Wednesday, trading at the strongest premium to the white metal – primarily used in auto-catalysts – since spring 2013.
"Repeat the pattern" from the GLD "across the futures and [spot wholesale] markets," says London broker David Govett at Marex Spectron, "and this is a market that is overly long up on the highs."
"Our concern," says South African investment bank and London bullion dealers Standard Bank, "is that the QE carrot has enticed longs into the market.
The European Central Bank, says Standard, is "better known for being underwhelming rather than decisive."
So the ECB "may well disappoint the markets once again tomorrow."
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