What’s happening to our gold market this morning? The dollar index is seen in positive territory and gold is up big. Economics 101 says that’s not supposed to happen. There must be some powerful forces effecting the gold price.
And they are…ETFs. I‘ve been writing a lot about this phenomena in the past few weeks. The gold ETFs are up over 3 million ounces in the last two weeks and up 5.41 pct. on Friday. So I felt it was time to get the pulse of the equity investor.
I have a number of friends who are financial advisors from my old days at Prudential Financial. Now they are spread all over at different firms. After speaking with them this morning there seems to be a few common denominators.
Anyway, the average ETF retail investor is usually in this market for the short term and for most, this investment seems to makes sense.
As the gold market continues its rally today and equities decline, I expect we will continue to see more participants enter the ETF arena.
Some retail dealers are reporting two good two way activity. Higher prices have brought some clients in to sell their metal, so a little less demand is seen by the mints and wholesalers as the retail dealers stock up on gold and silver from the secondary market.
CME Silver warehouse stocks continue to see redemptions of 1,000 ounce bars for consumption. On Friday 827,000 ounces were withdrawn from the CME warehouses. JP Morgan Chase took in 310,000 ounces Friday increasing their holdings to almost 44 pct. of all the depositories combined.
Is there a pattern developing here? We will see.
Gold registered warehouse stocks sitting at 159,000 ounces and total combined registered and eligible is 6,515,753 ounces.
One thing I hope doesn’t happen is, to see the market participants start to use the CME warehouse stock inventory to procure metal. If this pattern develops, I expect going forward we will see a direct impact on the price of gold and silver.
Author Name: Walter Pehowich
Walter Pehowich is the executive vice president of precious metals investment services for Dillon Gage with over 38 years of experience in precious metals investment services. His career began in 1977 at Bache (which evolved to Prudential-Bache Securities and then Jefferies Investment Bank). While at Jefferies, he served as senior vice president with oversight of investment grade precious metal products. Pehowich holds a National Futures Association (NFA) Series 3 license, authorizing him to advise and sell alternative investments in commodities and futures markets.