Avoiding The GLD
As the reported "inventory" of the GLD moves into negative totals for 2015, I thought it would be fun to bring some of these numbers into perspective once again.
Back on Tuesday, the GLD reported another outflow of "inventory". The drop was nearly 5 metric tonnes and it brought the total stated "inventory" down to 709.89 metric tonnes. As "inventory" began the year at 710.81 mts and price began the year at $1184, you can see that both price and "inventory" are now down slightly for all of 2015. But that doesn't quite tell the whole story.
Back on January 1, 2013, the price of paper gold was $1650/ounce. That day, the total "inventory" of the GLD stood at 1,349.92 metric tonnes. Again, as of yesterday, price was $1185 and GLD "inventory" stood at 709.89 mts. What's the big deal, right? Price is down and "inventory" is down, too. But let's put this into perspective as simple numbers often need context to be appreciated.
Since 1/1/13, the GLD inventory is now down 640.03 metric tonnes....
20,578,000 troy ounces
Slightly more than the combined holdings of Austria, Belgium and Mexico.
Stated another way, since there are about 400 troy ounces in every London Good Delivery Bar, over the past 27 months the GLD has shed about 52,000 of these:
And if you pile 192 of them onto a pallet, suitable for forklift movement back and forth across an LBMA vault, you'd fill about 271 pallets. That's a lot.
Of course, we're supposed to believe that this is all genuine, allocated and real gold...keeping in mind that the custodian for all of this "gold" is HSBC. (Yes, the same HSBC that has been charged with all sorts of crimes from tax evasion to market manipulation to money laundering. No doubt, though, that their custodianship of the GLD is on the up-and-up. <sarc>) I'm sure that none of this "gold" has been used to satisfy eastern physical demand. It has all simply been shifted out if the GLD and into other vaults, where it sits now, collecting dust...just a useless relic and antique.
But I digress, please allow me to give you some additional perspective...
After the ruthless and merciless, Cartel-sponsored beatdown of April 12-15 2013, a beatdown designed to smash the 19-month floor that had held near $1525, price fell further through June of 2013 before finally bottoming at...wait for it...$1180 on June 28, 2013. So, it has now been nearly two years and price is basically unchanged as of this morning.
But what has happened to the GLD over this same time period? Is its "inventory" unchanged, too? Hardly.
On the evening of June 28, 2013, the GLD reported "inventory" of 969.50 metric tonnes. Again, as of this last Tuesday and with price nearly unchanged in the 2 years since, total reported "inventory" is just 709.89 mts. That's a drop of 259.61 mts or nearly 27%. Using the same visuals as above, that's 8,347,000 troy ounces of about 21,000 London Bars filling 109 pallets. WOW! All while price is unchanged.
So, what's the point of all this?
To me, it's clear that the GLD is being drained of whatever physical gold it holds. This gold is being used to satisfy insatiable Asian/Eastern physical demand. If you own shares of the GLD and you think you actually own "gold", you don't. What you own is a simple paper proxy for the gold price. Suitable for day-trading and that's about it.
If you want to really own gold, your only option is to do what the Chinese, Russian, Indians et al are doing...BUY IT AND TAKE DELIVERY. You don't own it unless you hold it. In the end, when the music stops playing and the paper charade fails, those owning shares of GLD will find themselves wanting just the same as any other holder of an unallocated or pooled account.