Gold ETF Continues to Flex Muscles
Todd Stein & Steven McIntyre
In its first three days of trading, GLD traded roughly 30 million shares... and nearly all of that had been incremental demand (new buyers) according to the press. After a few weeks, however, the volume dropped off and there hasn't been a peep since about GLD from the press or the gold community. Obviously, the drop in the price of gold has muted the public's interest in GLD and the mining shares this is why we are so keyed up.
If you take a look at the streetTRACKS web site, there is a real time account of the amount of gold sitting in GLD's vault. Despite the drop in gold's price, the amount of GLD's ounces has been rising steadily over the last month, which shows that someone is quietly accumulating gold through the ETF.
Is it a fund liquidating gold mining stocks in an effort to diversify into physical? Perhaps. But we tend to think that word is getting out to individual investors that the U.S. Dollar's long-term prospects are grim to say the least. Heck, even Warren Buffett was on CNBC the other day saying that he is still very bearish on the greenback. Buffett has about $40 billion reasons to think he might be right long-term on the Dollar's downward direction and we don't think this fact is lost upon individual investors.
Foreign currencies are decent ways to play the Dollar's decline, but they have limitations in both the ease of availability to individuals and the fact they are hampered by clueless central bankers much like in the U.S. Gold and silver remain the only currencies not controlled by inept governments. Sure, the central banks could sell some more gold if they desire, but it will be a drop in the bucket if widespread gold investment demand picks up as we think it will. The quiet accumulation of GLD ounces is yet another early indicator that this gold bull market and dollar correction has just begun.
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