Wednesday, March 18, 2009

Golden Bubble Cont'd (Part II)

Another case for gold entering bubble territory. Tim Iacono at Seeking Alpha with the details:

To me, it's just fun to watch their stash grow as inventory at the world's most popular gold ETF passes holdings by central banks all around the world. Switzerland, you're next! Soon, GLD will be number six in the world and then it'll be a long way to go in relative terms to catch Italy at almost two and a half thousand tonnes but, at the rate they're going in 2009, that'll happen by this fall. Then it's just a chip-shot away to surpass France.

With net assets of over $33 billion, GLD is already the second largest ETF in net assets according to Yahoo! Finance behind only its SPDR brother SPY at about double that figure. Somehow, it seems like that gap might narrow rather quickly over the next year or so.


  1. How do you feel about this post now that Helicopter Ben has become ICBM Ben (ht John Jansen)? The Fed is printing another $1.15T to buy mortgages, agencies and Treasuries. The Swiss and UK have gone to QE and the Fed has followed. Why won't other countries follow suit?

    Under these conditions, what happens to gold?

  2. As it stands ICBM Ben is doing everything in his power to inflate us out of the current deflation. Assuming this works we will eventually have very high inflation which is bullish for gold. At some point all of the money printing will drive gold higher and the dollar lower. You can only hit the print money so many times before inflation rears its head.

    Of course since we have never seen QE like this or really anything like this, who really knows what will happen. Maybe gold goes down for some strange as of yet unknown reason. But based on all available economic history high inflation leads to high gold prices.

  3. Of course GLD doesn’t have the physical gold because there are no gold sales to match its huge accumulation.

    Check its prospectus which fudges on the physical possession.

    Plus there is a huge short on GLD ie GLD doesn’t need to hold that that gold. If more people buy GLD they just increase the short on the ETF. (The US Gov backs the GLD short just as they backstop the 2 gigantic shorts held by JPM et al on the Comex gold contract)

    A proper certified audited physical gold ETF runs at a premium eg GTU trades at 31% premium why would someone would be willing to pay 31% over the NAV of GTU to buy into it vs. not even paying NAV for GLD or they could buy 31% more GLD.

    Superficial analysis in the world of gold is just a silly as stupid analysis that occurred before Citibank etc collapsed in a multi trillion dollar pile that is going to grow to quad trillions.