ATLANTA (ResourceInvestor.com) -- U.S. Investors stampeded into gold over the past week on, among other troubling issues, heightened concerns of major trouble in the financial sector and stepped up geopolitical tensions in the Middle East.
SPDR Gold Shares, [NYSE:GLD], the largest gold exchange traded fund, reported an enormous increase of 45.99 tonnes of gold holdings Friday as the yellow metal marched up strongly to test the $960s for the first time since March. That's the largest one-day addition since GLD's November, 2004 inception.
Both gold and silver booked respectable gains for the trading week. Gold advanced a net $30.84 or 3.3% on the cash market with a last trade Friday 7/11 of $964.10. Silver tacked on a net $0.69 or 3.8% to a close of $18.784.
The Got Gold Report (GGR) is still on summer hiatus (through August) but unusual developments in gold ETFs prompted this special report.
Funds Flood Into Gold ETFs
Over the past week gold holdings at SPDR Gold Shares exploded a whopping 47.52 to 705.90 tonnes having added 28.21 tonnes the week ending June 27 and adding 14.22 tonnes the week ending July 4. As of Friday's figures there was the equivalent of $21.8 billion U.S. dollars worth of gold bars held by a custodian in London for the trust.
Gold holdings for the U.K. equivalent to GLD, LyxOR Gold Bullion Securities Limited, increased 2.09 to 117.92 tonnes of gold held. Barclay's iShares COMEX Gold Trust [AMEX:IAU] gold holdings remained flat at 61.21 tonnes of gold held for its investors.
For the week ending Friday, 7/11, all of the gold ETFs sponsored by the World Gold Council showed a huge collective increase of 50.7 tonnes to their gold holdings to 863.86 tonnes worth $26.7 billion.
For GLD this week's 47.52 tonne addition of gold is the largest one-week increase in metal holdings since the week of GLD's inception in November, 2004. It easily tops the second largest weekly increase of 39.62 tonnes set the week of January 23-27, 2006 with gold then trading in the $560s.
So that the price of each share of GLD tracks very closely with the price of 1/10 ounce of gold, (less accumulated fees), authorized market participants (AMPs) have to add metal and increase the shares in the trading float when buying pressure outstrips selling pressure. The reverse occurs when selling pressure overwhelms buying pressure. The extraordinary size of this week's metal addition suggests that buying pressure for GLD very strongly outpaced selling pressure for the period.
Source for data SPDR Gold Trust.
For the month of July, GLD is well on pace to shatter the previous monthly record addition of gold metal holdings also set in January 2006, with 70.52 tonnes added that month. As of July 11, GLD had already added an eye-opening 61.74 tonnes in nine trading days.
Volume for GLD skied higher for the week to 77,698,256 shares which is considerably higher than normal, but not a weekly record. Friday's (7-11) trading alone accounted for 25,994,642 shares, with GLD showing a last trade of $95.16.
Each metric tonne of gold metal contains 32,150.75 troy ounces of gold. The gold bars that GLD's custodian and most futures contracts are based on contain about 400 ounces each, so one tonne is usually a little over 80 of those bars. On Friday, 7/11 alone, GLD had its nametag placed on about 3,696 more London Good Delivery Bars.
All totaled, SPDR Gold Trust now holds about 56,500 gold bars for investors seeking exposure to the gold market via the exchange traded fund. To give a sense of how many gold bars that is, if they were all placed touching end to end that heavy golden line would stretch about 46,330 feet or about 8.7 miles long by 2.75 inches wide.
Silver Also Rises, but SLV Metal Holdings Flat
Apparently the lightening fast rush by fearful investors was primarily into gold, at least so far, because trading in the U.S. silver exchange traded fund was comparatively light.
In contrast to the big demand-driven additions of gold metal to gold ETFs, metal holdings for Barclay's iShares Silver Trust [AMEX:SLV], the U.S. silver ETF, remained flat at 6,000.02 tonnes of silver metal held for its investors over the past week. That suggests that as the spot price for silver rose, buying and selling pressure for SLV remained pretty balanced. At least so far it has.
Source for data Barclay's iShares Silver Trust.
Although higher than average, trading interest for SLV was subdued when compared to gold ETFs. For the week SLV turned in volume of just 4,220,612 shares or about 5.4% of the volume of GLD.
Premiums for some physical silver products remained quite firm over the past week despite strong gains for the metal. A spot check of one dealer to dealer electronic bourse revealed strong premiums being offered for U.S. silver eagles, all 10-ounce, name brand and generic 100-ounce, and now even 1,000-ounce bars with few or no offers available in quantity for any size bullion bars.
About the only physical silver product available at reasonable or no premium dealer to dealer as of Saturday, July 12, 2008, was 90% U.S. coins in $1,000 face value bags. Bags are apparently still plentiful for now and remain this report's favorite physical silver product.
Got Gold Report Charts
Silver Graphs. Please see the 1-year silver graph and the 2-year weekly version for this report's technical and expanded market commentary on the graphs themselves.
Gold Charts. Please see the 1-year daily chart for gold and the 2-year weekly version for context as well as this report's technical and market commentary on the charts themselves.
Gold Indexes. Please see the 9-month daily HUI chart and the 3-year weekly HUI chart for context and this report's commentary on the graphs themselves.
HUI:Gold Ratio. Please see the one-year daily HUI/Gold ratio chart and the 2-year weekly HUI/Gold version for context and this report's commentary on the graphs themselves.
U.S. Dollar. Please see the 1-year daily USD chart and the 2-year weekly USD version for this report's technical and market commentary on the charts themselves.
That's it for this special offering of the Got Gold Report. Until next time, as always, MIND YOUR STOPS.
The above contains opinion and commentary of the author. Each person should study the issues carefully and, as always, make their own informed decisions. Disclosure: The author currently holds a long position in iShares Silver Trust and holds various long positions in mining and exploration companies.
