Where did the GLD gold go?

[Aubuy]

"The SPDR Gold Trust GLD suffered net outflows of $6.77 billion in April, with losses for the year to May 8 at $14.67 billion, according to data from IndexUniverse."

So where does $14.67 billion in GLD gold go? I thought GLD represented actual bars of gold somewhere. Do they sell any excess bars to a mint to make coins and small bars or do they just let it sit in a warehouse until somebody else decides to buy it again?

Can anybody explain to me what happens with physical gold? Is the market about to get flooded with all the unsold GLD, or is there not nearly enough physical gold to satisfy demand or is it a little of both, depending on where you live? :shrug:

 

[pmbug]

I could be wrong, but I believe the net outflows mentioned in your quote refer to money leaving the ETF, not bullion leaving the vault.

The GLD bullion inventory has been drained significantly in recent weeks and speculation is that the gold is going to China.

 

[bushi]

...according to sources that I cannot recall, quoted by Max Kaiser in one of the recent Kaiser Reports; "the West have sold $16 billions worth of gold IOUs, since beginning of 2013. Meanwhile, Chinese housewives, prototypical Mrs. Wangs, have bought $16 billions worth of Gold BULLION, in the TWO WEEKS following the recent price smash"


..who is going to win at the end of the day, you think. People in the west seem to think, that Comex and futures markets is be all end all, while in fact, this is a tiny fraction of the whole physical gold market. Most of the gold that has ever been mined, is (a potential) part of the physical gold market.

BTW, re: Comex inventories: while it is certainly part of the story, to look in which way inventories are going, it is interesting to look at this from another perspective (quoting from SilverFuturist youtube channel): "there's no big warehouse full of frozen pig carcases, yet there is a futures market for frozen pig halves" . So again, Comex inventory, might not be all that important in the big scheme of things(?)

 

[Aubuy]

So Comex may or may not have as much physical gold as is represented by the paper trades? I assume that is because this paper represents gold that might be in various stages of production, from just coming out of the mine as raw rock, to traveling by trucks, to actually being delivered to mints and jewelry companies? Is Comex playing some kind of "float" in the production cycle kind of like check kiting, or are they just allowed to make up phantom gold bars (kind of like the Fed with money) when somebody wants to buy a contract, and the gold isn't there yet?

In the meantime you are saying that the physical gold that was being held by the GLD ETF is being drained or "sold" and that it might be going to housewives in China (or somebody overseas?). Are they actually loading this gold up and shipping it, or is this another paperwork entry on somebody's ledger and it's still here?

Then there is the amount of existing gold that is already out there in the world which is probably a large number, and some of that stays hidden (as coins, bars, jewelry, etc), and some of it get's traded back into the market depending on price and demand, so I guess that must be something of a wild card because it is unpredictable?

So at the end of the day we still don't really know where gold prices are going except we know that gold is still hard and expensive to mine, there are billions of people on the planet that like gold, and the central banks are running wild printing money (and making everyone nervous). So physical demand is going up, while paper demand is going down, which doesn't really make much sense for overall pricing of gold.

Is that a correct summary of the situation, or am I missing something? Thanks for helping me understand this.

 

[Unbeatable]

As far as I know GLD is a fractional reserve ETF. They only hold a small fraction of real gold for every $ invested in the ETF.

The average investor in GLD has no claim to the physical gold held in the fund however there is a mechanism where large shareholders, (The entry point according to video below is +-100 000 GLD shares which is $10 million dollars+) can actually take physical gold out of the GLD.



So now that there is a potential gold shortage taking place, a lot of investors are selling their GLD positions so they can switch to physical or at least allocated gold. (So the money you see being removed from GLD may actually be adding to the physical demand not taking away from it - because GLD was only investing a fraction of that $ amount in Phyzz.)

And some of the decreasing physical gold inventories of the GLD will be made up of big investors/companies taking physical gold out of the vaults. (I.e that gold is not being sold on the market.)

 

[Aubuy]

As far as I know GLD is a fractional reserve ETF. They only hold a small fraction of real gold for every $ invested in the ETF.

The average investor in GLD has no claim to the physical gold held in the fund however there is a mechanism where large shareholders, (The entry point according to video below is +-100 000 GLD shares which is $10 million dollars+) can actually take physical gold out of the GLD.

So now that there is a potential gold shortage taking place, a lot of investors are selling their GLD positions so they can switch to physical or at least allocated gold. (So the money you see being removed from GLD may actually be adding to the physical demand not taking away from it - because GLD was only investing a fraction of that $ amount in Phyzz.)

And some of the decreasing physical gold inventories of the GLD will be made up of big investors/companies taking physical gold out of the vaults. (I.e that gold is not being sold on the market.)

Now I understand. That makes sense. All the financial news lately has been predicting the great bond rotation (everyone selling bonds and moving into stocks with a collapse in bond prices) but instead it's the great gold rotation (everyone moving from gold stocks to physical gold). This is fun to watch Thanks for the help!

 

[bushi]

So Comex may or may not have as much physical gold as is represented by the paper trades? I assume that is because this paper represents gold that might be in various stages of production, from just coming out of the mine as raw rock, to traveling by trucks, to actually being delivered to mints and jewelry companies? Is Comex playing some kind of "float" in the production cycle kind of like check kiting, or are they just allowed to make up phantom gold bars (kind of like the Fed with money) when somebody wants to buy a contract, and the gold isn't there yet?

I am no expert in this, but... just think: with gold, most of what has been ever mined, is still with us - and it defines the REAL market size - as it can be (potentially) multiplies of the existing supply, and certainly IS majority of holdings. As I understand it, the futures market is mostly concerned with production, current, and future, as the name suggests . But the Comex itself is not the main player, as I understand it, it is intermediary between sellers/buyers, while active one (they are also buyer/seller themselves - for the orders that cannot be fulfilled among the buyers/sellers directly - it is called "Market Maker", if I am not mistaken - somebody ridicule me if I am talking from the wrong part of my body)

In the meantime you are saying that the physical gold that was being held by the GLD ETF is being drained or "sold" and that it might be going to housewives in China (or somebody overseas?). Are they actually loading this gold up and shipping it, or is this another paperwork entry on somebody's ledger and it's still here?

I am not sure where all this gold comes from, I don't think that GLD has any significance in that equation - it is just not up to the snuff .
My personal feeling is that "We Buy Gold" shops on every corner, might perhaps have a little mysterious "something" to do with incredible import rates by China (and these are only the official imports, that we know about). After all, it would be pretty easy, to hoover up anything that western public is willing to part with, with two simple steps: 1) register a wholesale-buyer mother company in the country X; 2) get your franchise out to anyone willing to work as an agent for you, and open the buy window in his shop, or a mall stand... 3) refine/export to China

Other than that, central banks are the only place where such amounts of gold could be possibly obtained from.

And most certainly, we are talking about the physical delivery (import) of gold by China (and few others), not some silly "ownership" of paper IOUs transfers, by entry in the ledger

Then there is the amount of existing gold that is already out there in the world which is probably a large number, and some of that stays hidden (as coins, bars, jewelry, etc), and some of it get's traded back into the market depending on price and demand, so I guess that must be something of a wild card because it is unpredictable?

yep.

So at the end of the day we still don't really know where gold prices are going except we know that gold is still hard and expensive to mine, there are billions of people on the planet that like gold, and the central banks are running wild printing money (and making everyone nervous). So physical demand is going up, while paper demand is going down, which doesn't really make much sense for overall pricing of gold.

Is that a correct summary of the situation, or am I missing something? Thanks for helping me understand this.

yep - if you ask me

 

[ancona]

It didn't exist in the first place, so it cannot have gone anywhere. It is metaphysical gold.