Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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.


© 2005-2022 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