How much effect has the increase in popularity of PM ETFs (exchange traded funds) had on PM prices t

Baley

Meaning, has anyone compared the graph of the inflows into these funds with the graph of the prices of gold and silver over the same time period.

and part B of my question, what do you think will happen to metals prices if these inflows change to net outflows, which is likely to happen if PM prices stop going up and even decline?

roadrunner

The inventory in GLD for example has basically remained stagnant for months while gold rallied. The new buyers must be getting exposure through other means, possibly hand held physical.

roadrunner

Baley

so, how has the inventory in the metals ETFs changed since then? For example, did the silver inventories held by the silver ETFs spike in April and drop in May, too?

secondrepublic

There is an observable correlation between the introduction of the gold and silver ETFs and increasing prices since that time. Another example I know quite well is Palladium. In 2008 and most of 2009, it was consistently trading in the $200s per ounce with no real up or down direction. Once word came down that the first palladium ETF (PALL) was going to be approved by the securities regulators, it immediately jumped to over $400/oz. and hasn't looked back.

Palladium is much more thinly traded than gold or silver, so there are some caveats here. Nonetheless, it was clear that as soon as it became easily for traders/investors to jump into palladium with low transaction costs, the metal jumped sharply in price. The ETF by its very structure allows many investors who would never buy physical, to get involved in the metal. That's an increase in real demand, which means higher prices, at least in the short term.

Baley

Thanks, that description sounds a lot like the mid- to late-1990's, when it suddenly became "easy" for everyman to trade his own stocks online.

derryb

Tremendous affect in the price run-up and in the recent pull backs. They are now the "herd" of PM investors.When one cow spooks, they all make a run for it.

roadrunner

The advent of gold and silver bullion ETF's have literally crushed the larger producer mining stocks for the past 3-5 yrs. They've essentially been stagnant demonstrating almost
no leverage to the price of metals in the longer run. Money that would have flowed into miners in previous bull markets has so far gone to the bullion ETF's.

roadrunner

derryb

<< <i>The advent of gold and silver bullion ETF's have literally crushed the larger producer mining stocks for the past 3-5 yrs. They've essentially been stagnant demonstrating almost
no leverage to the price of metals in the longer run. Money that would have flowed into miners in previous bull markets has so far gone to the bullion ETF's.

roadrunner >>


Excellent point that has been overlooked by mining investors, including myself.

Baley

I'd still like to see that graph overlay of the prices of the metals and the net asset value of the respective ETFs over time.

An overlay of net inflows and outflows as a function of the matal spot price over time would also be interesting to review

jmski52

<< The advent of gold and silver bullion ETF's have literally crushed the larger producer mining stocks for the past 3-5 yrs. They've essentially been stagnant demonstrating almost
no leverage to the price of metals in the longer run. Money that would have flowed into miners in previous bull markets has so far gone to the bullion ETF's.

roadrunner >>


Excellent point that has been overlooked by mining investors, including myself.

Does that now mean that mining stocks have now equilibrated to the new paradigm, or are they mortally-wounded due to a siphoning-off of their traditional sources of capital?

Spooly

Don't count on those PM ETF's to be holding "real" bullion. Pyramid of paper.... only good for short term trading.

Spooly

Bullion banking system 'not fully backed,' Naylor-Leyland tells CNBC Europe

derryb

EFTs like SLV make it easy for the bad guys to beat the price down.

cohodk

I contend that gold and silver would not be as high if not for the ETFs.

Many think the reason for the decline in gold over the last few months was due to the failure of MF Global. If so, then this adds plausibilty to my thinking.

derryb

<< <i>I contend that gold and silver would not be as high if not for the ETFs. >>


I think this guy agrees with you

57loaded

<< <i>The advent of gold and silver bullion ETF's have literally crushed the larger producer mining stocks for the past 3-5 yrs. They've essentially been stagnant demonstrating almost
no leverage to the price of metals in the longer run. Money that would have flowed into miners in previous bull markets has so far gone to the bullion ETF's.

roadrunner >>



#RR

+1

roadrunner

<< <i>I contend that gold and silver would not be as high if not for the ETFs.
Many think the reason for the decline in gold over the last few months was due to the failure of MF Global. If so, then this adds plausibilty to my thinking. >>



It may have indeed helped the price of physical and paper bullion. But I also believe it has hurt the GDX and GDXJ ETF's (ie the miners).

As far as this being a mortal wound, I don't think so. Miners flew high and fast from 2001-2004, and then did ok from 2004-2008. Since then they have been
basically in a 3-4 yr consolidation pattern like much of the metals, grains, softs, etc. Only gold seems to have clearly broken away from the consolidation area. Silver
retreating back to $26.05 came pretty close to it's $21-$22, 2 yr. beakout area neckline. But most everything else in the commods have been in consolidation for years,
even energy. And with QE still fully underway in silent mode it's only a matter of time before the next upleg in commods. At that point the miners will perform. Note that
they went up approx 10X from 2001. That kind of gain needs a long time to work off the euphoria. The last metals bull actually lasted 17 yrs (1962-1980). It's still early
in this one, esp if metals are moving more slowly than they did in the 1970's. The potential mortal wound in miners is the world's geo-political risk situation. What good is it
to have mining shares if your miner can be nationalized, permits revoked, shutdown by environmental compliance groups, labor strikes, involved in insurrections/wars, tax
and royalty increases, etc. There's no shortage of issues with miners. But if you want 2600 tons of gold added per year, they are the only way to get it. Gold is becoming money
to many nations and they are changing their way of thinking about the current deals they have with mining companies (Australia, Peru, Argentina, South Africa, Bolivia, Columbia,
Mexico, and yeah...even the US and Canada). China for example will ensure all of the mines located on its lands will continue to supply gold, even if that gold is only purchased
by the Chinese govt/people. The very best of the miners are rallying, that won't change. It's the other 95% of them that make you wonder "what next?" You'll probably see
GDXJ at 3X to 6X its current levels in the next 2-5 yrs. The thing is trying to outguess the swings will be very difficult. Riding the angriest rodeo bull would be much simpler.
The MFGlobal failure has added the addtional risk that even if you own GDXJ shares, who says they can be tracked to you in the event of another MFGlobal involving your brokerage?
Hence the advantage of physical or at least shares "assigned" in your name. Who needs leverage in mining shares when you can now get "almost" the same thing same with a
3X ETF (NUGT/DUST for miners) and 3X ETF for bullion (UGLD/USLV) as well as the 2X bullion ETF's that have been around for a few years. But these are all based on derivatives and
in the end there is not asset, just a bet on a bookie's table. Owning GDX and GDXJ via share assignment currently says you own shares in mining companies, that have resources in
PM's and base metals.

This from Andy Hoffman: "mining stocks, which not only are naked shorted into oblivion but have long-term off-take contracts requiring them to sell at the suppressed PAPER price."
If you haven't read Andy before this is his latest. He doesn't leave much untouched on the current PM and economic landscape. To those that still believe paper PM's aren't managed
just move along, nothing to see here. AH is not a fan of miners as you will find in the 2nd half of his letter when he talks about the recent PAAS/MFN acquisition. He feels the cartel has
targeted miners for extinction. Recall that when gold physical ownership was banned in the 1930's it was mining shares where people turned for safety and growth from 1932-1936.

Ranting Andy Hoffman

The decline in gold from late August occurred because it had gotten too far ahead of itself after an amazing 34 month (fib #) run. The banks were scared and they helped arrange
for numerous margin calls to unload their "soiled" shorts. Gold actually peaked out in August at $1912 rather than the low volume bounce in Sept. at $1922. After 34 months gold
had performed a nice 5 wave run. What more could one have asked of it? The MF Global issue was more window dressing imo & possibly just another event to assign causality to.

roadrunner

derryb

While the PM ETFs have made paper metal easily available to the average investor, do not loose sight that they have also been used to attack rising PM prices. I submit their creation was approved with this use in mind. Conspiracy theorists further argue they will be used to rob investors of the actual metal that make up the funds holdings. Recent MF Global events bring this very much into the realm of possibility.

Baley

Is that what's been happening lately?

cohodk

At least everyone seems to be consistent in their opinions.

Baley

<< <i>At least everyone seems to be consistent in their opinions. >>



Indeed

bronco2078

I think that they will all go down in flames not just the metals ETF's . They are stuffed full of worthless derivatives and IOU's.

Baley

How about now?

roadrunner

Considering the charters for GLD and SLV require them to purchase/sell gold and silver bullion in response to share purchases/sales I don't think the original statements really fit. These funds just follow the gold and silver markets. If the same amount of gold or silver wasn't in these funds, it would be another place and just as ripe for purchase or sale. With 171,000 tonnes of gold world wide, and unlimited otc gold derivatives, gold swaps, gold leases, LBMA gold contracts, Comex gold contracts, there's plenty of paper (and bullion) to sell off when the time is right. Once gold sold off under $1525 in April 2013 that started the big drop in GLD's inventory. That dropped reached the bottom in June 2013. With a zillion gold futures contracts dumped on the market between April 12th to April 15th 2013, it really didn't matter what GLD had or didn't have. It was going to respond to the huge volume and price drop in the futures. While it did accentuate the drop by piling on, that same net drop would have happened regardless of where that gold was stored and who owned it. GLD and SLV give the bankers additional means to whipsaw the markets to their advantage.

In SLV, it's bullion inventory has been generally flat the past 4 years despite the sell off. It's gained inventory since August/Sept 2011.

GLD and SLV fund holdings

The point made earlier in this thread about the miners being killed off basically came true with a smack down that made 2008 look rather tame. GLD and SLV helped to kill the miners. GLD and SLV are the tools of HSBC and JPMorgan respectively. They weren't created for J6P's benefit.