ETF gold sales used in Chinese take-down

New York closed at $1,103.20 down $30.70 on Monday it closed at $1,100.20 on Tuesday. This morning in Asia the gold price fell again to $1,094.  The dollar was weaker at $1.0940 down from $1.0854 against the euro, with the dollar Index down to 97.28 from 97.89.  The LBMA gold price was set this morning at $1,096.80 down $11.20. The euro equivalent was €1,002.74 down from €1,029.31 yesterday. Ahead of New York’s opening, gold was trading in London at $1,094.00 and in the euro at €1,001.33.

The silver price rose to $14.81 up 10 cents in New York. Ahead of New York’s opening it was trading at $14.77.

On Monday there was a sale of over 11 tonnes of gold in the SPDR gold ETF [GLD], which was arbitraged across into the Chinese market on Monday morning. Once again at the close yesterday a large amount of gold was sold out of the SPDR gold ETF of 4.77 tonnes and sold into the Chinese market overnight, pushing prices down there. The holdings of the SPDR gold ETF are at 689.693 tonnes and 167.76 tonnes in the Gold Trust.

Until demand jumps up in China such sales will push prices down. What does this mean? HSBC is the Custodian of the SPDR gold ETF and so responsible for sales and purchases of gold to the fund from the gold market. They have to be able to do that easily, so as not to be caught with stock on its own books and so risking moves in the gold price itself. It may also act on its own account too. But it needs to ‘set off’ its risks [or support the ‘bear raid’] and be able to dispose or acquire gold to match moves by its clients. In the heavy selling in Asia following the sale from the SPDR ETF the U.S. HSBC [et al] ‘laid off’ this position in Shanghai. This shows that western banks can and do ‘arbitrage’ gold into China immediately. The Chinese market is seeing this for the first time.  For more -

These sales are a well coordinated ‘bear raid’, which has made the market emotional, as support levels are broken and have turned into resistance. We do expect Asian demand to return, as prices they have not seen for years are offered. They need time to factor in what is happening and react. So it is pertinent to ask, “Is this a final sell-off?” These sales are not currency related. Investors are wise to use calm forethought before acting.

For the first time in years the silver price has refused to follow gold down showing that traders believe that while gold is being hit hard, it may well recover just as fast as it fell. Silver rose when gold fell again. Investors should ask why?

Julian D.W. Phillips for the Gold & Silver Forecasters - and