Gold Magically Flows Back Into The GLD

10
Fri, Feb 5, 2016 - 11:17am

Even without speculating whether or not the GLD actually holds all of the gold that it claims, the remarkable additions to "inventory" over the past month are certainly noteworthy.

It has been well-documented that, as price was run down from $1800 to $1050, massive amounts of "gold" flowed out of the GLD. Total "inventory" reached a low on 12/17/15 when it showed just 630.17 mts. That's a total loss of 719.75 mts of "gold". This is a little over 23MM troy ounces or about 57,851 London Good Delivery Bars. Stacking 192 bars/pallet, this fills out about 301 of these:

(Please pause for a moment to consider the sheer magnitude of this amount of gold.)

Well, this pattern of depletion appears to have ended and we've often wondered from where the custodian, HSBC, would source gold when interest in the ETF inevitably returned. That's a topic for another day, I suppose.

For now, consider this...

In hindsight, it appears that on 12/18/15, the trend of huge drawdowns ended. That day, a massive 18.74 metric ton "addition" suddenly appeared. This brought the total "inventory" up to 648.91 mts. Three separate withdrawals followed with "inventory" falling back to 640.97 mts on 1/6/16.

Since then, however, something remarkable has occurred...something that we've not seen since the paper price beatdown began in 2012. With Thursday's 3.57 mt addition, there have now been thirteen, consecutive additions without a drawdown...for a total of 52.69 metric tonnes.

So, as if by magic, the GLD has now brought it's total "inventory" back up to 693.62 mts. The addition of 52.69 metric tonnes over the past four weeks is remarkable for the size and scope of the find. And again, we must ask, from where did HSBC source this "gold"? And for those keeping score at home, 52.69 mts of gold is about 1.7MM troy ounces or 4,250 of these:

Either way...whether HSBC actually managed to find 52.69 tonnes of real gold or not...and whether these additions are due to returning "investor demand" or just Authorized Participant short-covering...this string of "inventory" additions is almost undeniably bullish as a build up like this hasn't occurred since 2011.

Oh, and one more thing. It was noted above that the bottom for the GLD "inventory" was seen on 12/17/15 at 630.17 mts. The very next day, 12/18/15, the ETF saw a massive addition of 18.74 mts of "gold". Take a look at the chart below. Hmmm. Coincidence?

TF

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