Investor Demand Driving Gold Price Spiral?

Teresa, February 29, 2008 @ 11:30AM ET | Link | RSS | Read via Email | Start a Discussion  

27-gldetf.gifSpeculators in commodity futures basically open a bet if another trader can be found to take the other side. In the majority of cases, the bet is closed out before expiration, settled in cash without the actual “stuff” changing hands. That got me thinking.

GLD and other gold ETFs are doing something very different than what futures trading used to do: they are taking tonnes and tonnes of the stuff off the market. In effect, investor demand via exchange traded funds has become a new phenomenon in the supply/demand equation, fuelling the price spiral like never before.

We took a look at some numbers from the SmartMoney ETF screener:

As of the close on February 28, 2008, StreetTRACKS Gold Shares held 639.44 tonnes of gold valued at $19,725,219,813 while the Comex Gold Trust held 59.93 tonnes valued at $1,857,851,989 for a combined total of $21,583,071,802 in net assets, eclipsing $17 billion assets under management in QQQQ.

gld_valut.jpgTake a look at the picture to the right. It is of gold bars belonging to the streetTRACKS Gold Shares ETF. That’s right. They have 639 TONNES of it. They have so much of “the stuff” that the vault resembles an IKEA WAREHOUSE. It’s simply amazing.

I for one am very interested to see how price action unfolds as performance-chasing State-Run Funds and institutions allocate away from traditional asset classes, pouring billions of dollars directly into crude oil, copper and other commodities. Bubbull, anyone?

More Articles from Our Blog

Recent Comments and Discussion

Join the Discussion

Portfolio Strategy clients: Please log in and the text box will automatically appear right here for you to join the discussion.

This entry is closed to comments. Please accept our apologies.