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6/5/15

GLD: Less is more

While doing the morning newsround this came up on the list. It kept gnawing at me to the point where I came back and read it two or three times, because I can't for the life of me decide whether it's good or bad news for the gold sector. On balance I'd say good. This from Reuters yesterday:
LONDON (Reuters) - The world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, is no longer one of the top 10 U.S.-listed ETFs by value, according to data from FactSet.
The value of the GLD fund, which issues securities backed by physical bullion, dwindled to $27.148 billion this week, data on its website showed, as its gold holdings fell to their lowest since mid-January at 709.9 tonnes.
That makes it the 12th largest fund by value listed by ETF.com, which uses FactSet data. At its peak in August 2011, a month before gold prices hit a record high of $1,920.30 an ounce, its value reached $77.5 billion. Continues here
Why good on balance? Because it's now been two years since the big waterfall drop in gold and even though GLD holdings have sunk in tonnage terms (as expected) as the cash tied up there goes to find equity alpha in our low rate world, gold hasn't dropped off the expected cliff, it hasn't gone under $1k/oz as predicted by the big houses, it's been pretty darned steady at-or-around $1.2k in fact. Now I'm clear that this isn't bonanza price time and miners are no longer licences to print money, but with the drop in costs the better ones are now decent companies that make profits. Or they should be.

And the likely reason for gold's stubborn price resistance? Look no further than China, the people who have bought it all up while "Wall St Whitey" (to use Iwnattos's phrase) has turned collective backs. Which begs the question of who's right about gold, China or USA?

UPDATE: Iwnattos gives us a new Wall St Whitey post on gold, right on cue.