Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19
Gold Price Gann Angle Update - 10th July 19
Crude Oil Prices and the 2019 Hurricane Season - 10th July 19
Can Gold Recover from Friday’s Strong Payrolls Hit? - 10th July 19
Netflix’s Worst Nightmare Has Come True - 10th July 19
LIMITLESS - Improving Cognitive Function and Fighting Brain Ageing Right Now! - 10th July 19
US Dollar Strength Will Drive Markets Higher - 10th July 19
Government-Pumped Student Loan Bubble Sets Up Next Financial Crisis - 10th July 19
Stock Market SPX 3000 Dream is Pushed Away: Pullback of 5-10% is Coming - 10th July 19
July 2019 GBPUSD Market Update and Outlook - 10th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

John Paulson’s Fund Obscures Gold and Silver ETF Flow Data

Commodities / Gold and Silver 2011 Nov 30, 2011 - 03:21 AM GMT

By: Dr_Jeff_Lewis

Commodities

Absent the weekly COT report for gold and silver, the array of exchange-traded funds available on the market acts as an excellent source of money flow data for both silver and gold.  While the media tends to focus on total assets, exchange-traded funds also release the quantity of gold and silver attributed to individual exchange-traded funds.


Recently, gold and silver ETF flows have been obscured by a rift in the market.  John Paulson, who earned headlines after betting big on a housing crash, has since seen his funds significantly underperform the market.  Combine underperformance with growing fears about the global economy, and you have a perfect storm for hedge fund outflows.  Analysts on Wall Street have picked through Paulson’s fund holdings, looking for opportunities to buy assets as his hedge fund unloads on the market.

ETF Flows

Gold and silver ETFs almost perfectly follow gold and silver prices in the short-term due to algorithmic arbitrage between exchange-traded funds and the current spot price quoted by commodities exchanges.  Therefore, while investors are unlikely to steal the popular GLD or SLV ETFs at a discount, the GLD and SLV holdings held by Paulson are obscuring a popular source of data for precious metals investors.

Recently, inflows into the GLD ETF have rocketed.  As Paulson unloaded as much as one-third of his holdings in GLD, the amount of gold held in storage and attributed to the fund rose to nearly 1300 metric tonnes, up from 1200 tonnes in June.  Meanwhile, the SLV exchange-traded fund reports flat-lining in total silver held in supply.  The SLV ETF shows holdings bouncing between 9,500 and 10,000 tonnes for much of the past quarter.

Data Contradiction

Open interest in the futures markets for both gold and silver has declined since summer, an indication that investors are curtailing bets on risk assets.  Meanwhile, the CTFC’s COT report for currencies confirms this evidence with rising bets on the US Dollar and Japanese Yen against riskier currencies like the Euro and British Pound.

However, these broad measures of sentiment do not reflect investors desire to hold silver and gold while keeping their options open.  Spot gold and silver ETFs do not show the same plunging open interest, which indicates investors are interested in gold and silver only if they can buy at spot.  Precious metals ETFs are more liquid, offer better short-term plays on bullion, and lack the backwardization or contango concerns that come with futures positions.

While the risk-trade dial appears to be turned to the “off” position, there hasn’t been any real negative change in investor demand for either silver or gold in the short-term.  Is Wall Street waking up to long-term stores of value?  Is Wall Street’s shunning of the futures market in exchange for ETF holdings indicative of distrust in the commodities futures exchanges?

No conclusion can be drawn from trading data at this time.  It does appear, however, that supposedly “risky” assets in the investment community have held their interest better than media reports might suggest.  Risk-trades are off—unless the risk-trade is a bet on inflation.

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

    Copyright © 2011 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules