Golden Minerals Company

Redemptions In The GLD Are Bullish For Gold

Submitted by Tyler Durden on 06/04/2013 - 12:49

Recent outflows from physical gold exchange traded products have been interpreted by the financial press as a sign of weakness in the demand for gold as an investment vehicle. However, a closer look at the evidence suggests otherwise - the evidence presented here suggests that, contrary to what has been stated in the financial press, the flows out of the SPDR Gold Trust may have been generated by the bullion banks to take advantage of an arbitrage opportunity in the physical market. This arbitrage opportunity occurred because of the intense demand for gold stemming from Asia and the inability of traditional suppliers to provide this gold (hence the large Shanghai premium). We believe that this activity further supports our hypothesis that there is a lack of availability of physical gold and an obvious dislocation between the physical and paper gold markets.