Gold ETFs Are Liquidating By the Ton

An ounce of gold, often represented by a single American Eagle coin, is a fairly easy thing to visualize. Even a 400 ounce gold bar, like the ones held at Fort Knox, is a fairly fathomable concept. But when you try to get your head around just how much of the metal an ETF like the SPRD Gold Shares (GLD) owns, it can get a little daunting. And the same is true when you try to track how much they’ve had to sell as the price of gold slips to a 2-1/2 year low.

“300 tons,” says Tom Lydon, the editor of ETF Trends, in the attached video, calling the disposal of over 600,000 pounds of gold so far this year “amazing” and “incredible.”

This, of course, as the largest metal-tracking fund has gone from briefly being the biggest ETF, to being a top-5 player after being cut in half to approximately $46 billion in value today, holding just over 1,000 tons of gold in its vaults.

While gold is clearly out of favor forcing the hand of holders to sell into weakness, Lydon says it won’t always be that way.

“Central banks maybe aren’t as concerned,” he lists as one reason why gold is down. “I think the average investor, with stocks and bonds doing so well, I think they say, ‘hey, I don’t need to hedge, so that gold position I had, I’m going to put that into stocks for now.’”

It’s a reality, a trend, a self-perpetuating sell-off that seems to have no bottom in sight, as the darling of last decade turns into the dog of 2013.

“It’s been tough enough to beat the S&P this year, and if you’ve had money in gold, that has hurt you,” Lydon says.

Source: http://finance.yahoo.com/blogs/breakout/gold-etfs-liquidating-ton-112206437.html

“Panic” For Physical Gold Spreads To UK Where Royal Mint Sales Of Gold Coins Triple

Following the entire “developing” world (where faith in paper money “backed” by $1 quadrillion in derivatives is at times questioned, and instead the people, for some inexplicable reason, fall back to hard currency equivalents) scrambling out to their local precious metal dealers to find “out of gold” signs virtually everywhere, yesterday it was the US Mint’s turn to announce it had halted shipments of the popular one-tenth ounce gold American Eagle coin as it had run out, following a surge in demand (we expect this shortage will soon spread widely to traditional one-ounce denominations shortly).

Things in the US have gotten so bad, not only are most online dealers backlogged weeks and months in advance for most PMs (as the CEO of Texas Precious Metals explained in detail), but respected bullion vaults are also now on the verge of running out of inventory. As Reuters described, “Michael Kramer, president of Manfra, Tordella & Brookes (MTB), a major U.S. coin dealer in New York, has been inundated by orders from existing and new wholesale and retail customers. “It’s panic. This is one of the busiest times in quite a while. People think gold’s at the lows and they want to take advantage.

It was only a matter of time before the last bastion of paper money, London, also succumbed to the soaring demand for physical, and sure enough moments ago Bloomberg reported that the “Britain’s Royal Mint, established in the 13th century, sold more than three times more gold coins this month than a year earlier as prices declined.”

Sales are more than 150 percent higher than last month, according to Shane Bissett, director of bullion and commemorative coin at the Royal Mint.

“Since the dip in the price of gold we have seen increased demand for our gold bullion coins from the major coin markets, and this presently shows no sign of abating,” Bissett said by e-mail in response to questions from Bloomberg. “The Royal Mint continues to supply to its customers and is increasing production to accommodate the higher demand.”

Its not only the UK Mint, but a pervasive global “panic” to get as much gold as possible while prices are as low as they are, courtesy of the recent takedown in spot.

Standard Chartered Plc said yesterday its gold shipments to India last week exceeded the previous record by 20 percent and were double the total of the week before.

“The concern is really how long it can last,” said Dan Smith, an analyst at Standard Chartered Plc. “A lot of people surge in on the low prices and then they are likely to back away a bit as prices rally and they’ve restocked.”

Don’t worry, Dan: for now the surge is going on, and on, and on, and so on. We will be sure to inform you, however, when physical demand is finally satisfied. Until then, we have several months of backlogged demand to catch up on, and possibly the default of one or two depositories in the meantime.

Finally, for all those confused by the non-linear relationship between paper gold (selling via ETFs and other), and physical gold (buying via retail and corporate channels), here is Bank of America with a quick and dirty summary of how to think about the relationship:

With prices now below $1,500/oz, we expect a pick-up in jewellery demand in the medium term and see considerable pain for miners should prices dip below $1,200/oz. As such, we believe the downside to gold prices may be limited to an additional $150/oz. In fact, we estimate that jewellery demand may become so pronounced by 2016 that prices could trade above $1,500/oz even if investors remain net sellers. Looking at sensitivities from a different angle, investors would need to buy merely 600t of gold to sustain prices at $2,000/oz by 2016, compared to non-commercial purchases of 1,798t in 2012.

So yes – physical demand can and will offset even virtually unlimited paper selling, assuming of course demand for physical persists at the recent pace.

Source: http://www.zerohedge.com/news/2013-04-24/panic-physical-gold-spreads-uk-where-royal-mint-gold-coin-sales-triple

US Mint Halts Sales, Depletes Inventory Of One-Tenth Ounce Gold Coins

We have been reporting extensively on the terminal disconnect between the paper gold market, which tumbled ten days ago for a variety of reasons, and the physical gold market which one can safely say, has seen a record surge in demand by those who wish to take advantage of the tumbling prices, depleting inventories of gold and silver in virtually all jurisdictions, and leading to the a record purchase of gold in the US mint a week ago as also reported here.

Today, we learn that, as expected, none other than the US Mint has officially run out of small denomination gold coins, in this case One-Tenth ounce American Eagle gold bullion coins. We are confident this incontrovertible proof of soaring retail demand for physical will somehow result in JPM or another bullion bank dumping a few extra thousands ounces of paper/electronic gold or silver to further disconnect the paper price from what is actually going on with physical demand. As for the US Mint, first it’s fractions of an ounce: look forward to the mint running out of all bullion denominations in the coming days and week, first in gold, then in silver as well.

From Reuters:

The U.S. Mint said it has suspended sales of its one-tenth ounce American Eagle gold bullion coins as surging demand after bullion‘s plunge to two-year lows depleted the government’s inventory.

This marks the first time it has stopped selling gold product since November 2009, dealers said. A spokesman for the Mint did not return calls seeking confirmation of that milestone.

The U.S. Mint, one of the world’s leading gold and silver coin producers, halts coin sales from time to time as it runs out of coin blanks to meet increases in demand.

So far in April, the U.S. Mint has sold 175,000 ounces of American Eagle gold coins, putting it on track to challenge a high of 231,500 ounces set in December 2009.

* * *

While the one-ounce American Eagle gold coins remain the most popular size, year-to-date demand for the one-tenth ounce coins has been up over 118 percent compared to the same period in 2012, the Mint said.

We, for one, can only hope that the idiotic smashdown of spot paper gold continue and the price is sent to $0 or negative, while the last remaining physical ounce in inventory disappears at any price.

At that point the exchanges will have quite a few anxious people to answer to, the second someone demands even one bar in delivery.

Source: http://www.zerohedge.com/news/2013-04-23/us-mint-halts-sales-runs-out-inventory-one-tenth-ounce-gold-coins-due-strong-demand