Had to read this several times, and finally used a
pencil and paper to mark out all the players and where they moved to.
Friday, February 22, 2013 at 12:26 pm
by Turd Ferguson
broach this subject again.
yesterday, the GLD saw a withdrawal of 8.88 metric tonnes. This followed a drawdown of nearly
23 tonnes on Wednesday. In fact, since
the start of 2013, the GLD is now down 59.61 metric tonnes or 4.42% of "inventory".
where has that gold gone?
- Has it simply been returned to the Authorized
Participants' vaults as investors reduce their exposure to precious
- Have GLD investors liquidated shares
and taken delivery?
- Or, as argued back in November, are
the APs using the GLD as a store of gold that they
can easily access anytime they struggle to find legitimate physical
metal to deliver to clients demanding immediate allocation and delivery?
third bullet is true, then GLD drawdowns would be symptom of
very strong, global physical demand.
SUPPRESSION MECHANICS OF GLD & SLV
bullion banks finance their ‘physical inventory’ by leasing it or selling it
to GLD and SLV shareholders/investors, then the bullion
banks in turn use these ETF’s inventories as a ‘flywheel’ to both
manage and leverage their physical reserves. For this walk-through, I will
use GLD as an example. (One can substitute SLV for all
that is described below relating to GLD except the basket sizes are
smaller, constituting 50,000 shares).
of GLD shares are bought and sold through a limited number of Authorised Participants. The authorised participants, (AP’s), are JPMorgan,
Merrill Lynch, Morgan Stanley, Newedge (a
joint venture between Société Générale and Credit Agricole CIB),
RBC, Scotia Mocatta, UBS and Virtu Financial. This is how it is supposed to work.
The size of each GLD basket comprises of 100,000 shares, each share
representing just less than 1 troy oz. The AP’s, transfer ALLOCATED physical
gold to the trustee who in turn creates the required number of new baskets of
shares and then transfers these newly created shares back to the AP. To
redeem the shares for physical gold or silver, the AP’s transfer any number
of the baskets of 100,000 shares back to the trustee who then redeems these
shares and transfers allocated gold back to the AP.
all well and good on the face of it, but there are a number of ways this
‘allocated’ gold backing the shares in the ETF can be diluted
/hypothecated in order for the bullion banks to ‘manage’ their physical
rest of the article here
Source...TF Metals Report