The Death of the paper gold market picked up speed today as Blackrock’s
Gold IAU ETF announced that issuance of new shares was suspended.
However, it’s much worse than the information in news release when we factor
in the total supply and demand situation.
According to the article on Zerohedge, BlackRock Suspends ETF Issuance Due To “Surging
Demand For Gold”:
BlackRock’s Gold ETF (IAU) has seen fund inflows every day in 2016 (no
outflows at all) and with the stock trading above its NAV for most of the
year, the world’s largest asset manager has made a significant decision:
•*BLACKROCK SAYS ISSUANCE OF GOLD TRUST SHARES SUSPENDED
• *BLACKROCK SAYS SUSPENSION DUE TO DEMAND FOR GOLD
Now, why is this so interesting? Because, this now suggests
a tightness in the paper gold market due to the last several years of surging
physical gold demand…. especially now that China has recently become
an “official” Central Bank buyer of gold.
If we look at the increase in Blackrock’s iShares IAU ETF gold
inventories, they have increased 1.2 million (Moz) in the first 2
months of the year:
The iShares IAU ETF held 4,905,600 oz of gold at the end of 2015, but this
jumped 1.2 Moz to 6,133,283 oz presently. This is nearly a 25%
increase in gold inventories in only two months. As we can
see, the outstanding shares increased from 508.1 million Dec 31st 2015, to
635.6 million shares currently.
In order for Blackrock to issue more shares of its gold IAU ETF, it will
need to acquire more physical gold. Blackrock’s news release also
stated the following:
February marked its largest creation activity in the last decade.
This surge in demand has led to the temporary exhaustion of IAU shares
currently registered under the ’33 Act. We are registering new shares
to accommodate future creations in the primary market by filing a
Form 8-K to announce the resumption of the offering of new shares.
Blackrock says they are registering new shares to accommodate future
creations in the primary market. The question to ask is this….. why
wait until shares are exhausted before filing a 8-K form to acquire additional
shares? Is it just a matter of getting new paper shares, or is it a
matter of acquiring the physical gold to back those shares?
This is a good question because if we look at the SPDR’s Gold GLD ETF,
they don’t seem to have a problem adding more gold to their inventories:
While Blackrock’s has suspended issuance of new shares of its IAU Gold
ETF, SPDR’s GLD ETF doesn’t seem to be having a problem as it has
added a whopping 4.8 Moz of gold to its inventories in the past two
months–four times the rate of the IAU Gold ETF.
The GLD ETF had 20.6 Moz of gold in its inventory in the beginning of the
year, but now holds 25.5 Moz. Just these two gold ETF’s have added 6
Moz of gold to their inventories in just the first two months of the
year. This is an amazing feat when we realize total mine supply was
likely only 14.5 Moz for January and February.
Surging Gold ETF Demand Destroys Supply & Demand Balance
According to the World Gold Council’s 2015 Full Year Demand Trends, the
gold market suffered a 43 metric ton (1.4 Moz) deficit in Q4, even with a net
outflow of Gold ETF’s of 69 metric tons (2.2 Moz):
If the gold market suffered a 1.4 Moz deficit in Q4 2015 even with
2.2 Moz of supply coming from Gold ETF outflows, what kind of trouble is
taking place now with just two Gold ETF’s added 6 Moz to their inventories in
just two months. Folks, this translates to 187 metrics of
additional physical gold demand during JAN-FEB compared to a 2.2 Moz outflow.
This is an amazing net 8.2 Moz change in Gold ETF demand in just the first
two months of 2016 versus Q4 2015. No wonder Blackrock had to suspend
issuance of new shares. We may be finally witnessing the READ
ENDGAME TO PAPER GOLD MANIPULATION.
It will be interesting to see how things unfold over the next few months
as more cracks continue to appear in the Greatest Financial Paper Ponzi
Scheme In History.
