Note only modest profit taking from noon - on.

Again, much of this week’s commentary is contained in comments inserted in the actual linked charts below, and we will be adding additional “intel” to the blog often going forward, so we’ll leave it there for now. 

Before moving on to this week’s Radar Screen items of interest, we want to highlight and call attention to a thoughtful and brief comment about this week’s breakout for gold from our friend and GoldMoney founder James Turk.  We think the key paragraph in James’ Free Gold Money Report update this week is quoted just below, but everyone please do take the time to view the full comment:

“Given that the market is becoming increasingly aware from GATA’s efforts that the gold cartel is a naked short, it is unlikely that the demand for physical metal will subside here.  I expect in fact that it will continue to grow.  After all, what would you rather own?  Physical gold, or a piece of paper purporting to represent your ownership of gold?  Or a comparison even more stark, would you rather own physical gold or the debt of Greece, UK, Spain, the US or any other overleveraged debtor?”

Once again we reiterate our longer-term view that the world will most likely continue down a path of fiat currency debasement, weakening confidence in all fiat currencies.  We see the setup as long-term very bullish for gold metal and extraordinarily bullish for silver looking well ahead – if the world “holds it more or less together.”

***

Moving on to the first of the Radar Screen-worthy items this week. 

Gold ETFs:  SPDR Gold Shares (GLD), by far the largest gold exchange traded fund, reported adding a big 11.22 tonnes to show 1,141.04 tonnes of allocated gold bars held by a custodian in London.  That is a new record for gold metal held by an ETF. As of the Friday, April 9 close GLD’s metal holdings were worth USD $42.3 billion.  Just below is our graph of GLD’s metal holdings over the last year (right axis) along with the price of gold (left axis).     

Source for data SPDR Gold Shares. 

The authorized market participants for gold ETFs add gold (and increase the number of shares in the trading float) in response to more buying pressure than selling pressure and vice versa.   

Although GLD’s metal holdings have reached a new all-time record size over the past week, notice please that the metal holdings have also broken out of a wide, triangular consolidation.  If GLD’s metal holdings were a stock, we’d say it was attempting a breakout now. 

The previous high for GLD metal holdings, 1,134.03 tonnes, occurred all the way back on June 1 of 2009 (9 months ago).  From June 1, ’09 to August 25 GLD shed about 72 tonnes of gold bars (to 1,061.83 tonnes August 25) as the price of gold actually drifted higher from $938.25 to $950.50. 

As gold caught a bid last year in September, GLD metal holdings “answered,” reflecting consistently more buying pressure than selling pressure.  By December 31 (3 months and 10 days ago) the trust held 1,133.62 tonnes, just under the previous June’s record size.

Thus, it has taken nine months of consolidation for there to be enough of a difference in buying pressure over selling pressure for shares of GLD to cause the authorized market participants (AMPs) for the trust to increase the number of shares in the trading float and bring the ETF’s metal holdings to a new all-time high. 

Another way of looking at it is that for the last nine months the buying and selling pressure for shares of GLD has, more or less, been relatively balanced, but as shown in the graph just above, we can see that since about February 4 of this year (1,104.55 tonnes with gold at $1,083.25) there has, once again, been modestly more buying than selling pressure for the ETF shares.  Since February 4 GLD metal holdings have increased by 36.49 tonnes or 3.3% as gold metal has advanced $78.75 or 7.3%. 

The graph above might lead someone to conclude that there has been a lot of change in the GLD metal holdings over the last year, but the scale of the right axis and the relatively short timeframe skews that impression somewhat.  When we look at a longer-term graph of the change in metal holdings for GLD, such as the one just below going back to early 2006, we see the consolidation of the last nine months in better context.    

The past nine months have not been much more than near-flat in other words.  Has the market now finally digested a gold price above $1,000?  Are we about to go into another period of much heavier investor buying of GLD shares than selling? 

We don’t know for sure, but the fact that GLD just reported a new high in metal holdings means that there has been more buying than selling just recently. We also know that if there is more buying than selling pressure it will show up in the form of increased metal holdings at GLD, and vice versa.       

Silver ETFs: Despite the positive money flow into gold ETFs, metal holdings for BlackRock’s  iShares Silver Trust (SLV) have recently been heading in the opposite direction.  We find that odd and mildly disconcerting because on the surface it suggests that investors are more intent on taking silver profits than they are in accumulating silver.  That it comes at a time when there could be a physical-grab from the various futures and forwards exchanges in the near-term works is puzzling, to say the least.    

Over the past week metal holdings at SLV declined a relatively small 38.9 tonnes to a reported 9,178.27 tonnes of average 1,000-ounce allocated silver bar inventory. As of the Friday close the largest ETF silver hoard in the world (held by SLV) was worth $5.4 billion.  Just below is our graph of SLV metal holdings over the past year.    

Source for data, iShares Silver Trust.

Like GLD, the authorized market participants for SLV add silver (and increase the number of shares in the trading float) in response to more buying pressure than selling pressure and vice versa. 

On December 21 SLV reported holding 9,514.35 tonnes with silver then trading at $17.27.  As of Friday silver closed at $18.39 on the cash market and SLV reported allocated silver bar holdings of 9,178.27 tonnes.  Over that roughly three-month period, as silver actually rose about $1.12 or 6.4% metal holdings at SLV declined 336.08 tonnes or 3.5%.  So, what we have been seeing since about December 21 has apparently been more selling pressure on SLV shares than buying pressure.  Go figure. 

Just as we did with GLD above, let’s take a look at a longer-term graph for SLV metal holdings for a little context.   

Yes, there has been some negative money flow for the largest silver ETF just recently, but when we view it in a longer term context it really doesn’t seem all that much of a decline, does it? 

Having said that, with premiums for physical metal back to ordinary and normal levels recently (especially for our favorite physical silver item; pre-1965 90% U.S. coins in $1,000 face value bags), and with the recent upsurge in investor concerns about third-party and counter-party risk, we can understand if some SLV investors have decided to convert their SLV shares into physical metal while the “converting is good,” or perhaps diversifying out of SLV into another of the various silver trading vehicles, such as the ETFS Silver Trust (NYSE:SIVR) for example. 

We could be wrong, but we sincerely doubt that the current condition of lower metal holdings for SLV will continue very much longer.  If this current breakout for gold isn’t quickly clobbered into submission with a mountain of paper gold we fully expect to see the world populace embracing the white metal once again.  That would almost certainly translate into increased metal holdings for silver ETFs. We’ll see.   

Full disclosure, we’ve been doing a bit of that SLV conversion idea opportunistically here at Got Gold Report.  Not because we have concerns about SLV.  We really don’t.  We have been converting some, that’s some, our SLV shares into physical metal because we want the satisfaction of having taken advantage of the recent drop in what had been quite high premiums not very long ago.  We very much doubt that physical premiums will stay so reasonable once there is a general rush back into silver, whenever that day arrives.      

GotGoldReport.com Launched  

We are pleased to announce that the very first portion of GotGoldReport.com is now operational.  Special thanks to Ron Brown, of Pro-Edge Consulting Inc. are in order, who, along with Tracy Wesloski made this not-so-young bullion trader comfortable with the editing software which makes GotGoldReport.com a possibility.  We are still working through the various “architecture plans” and getting the full web site model designed, but for now we have a new platform for the immediate dissemination of important “GGR intel” for our valued readers without any delay.  

The long-range plan for the web site is to invite corporate sponsors for the new blog initially, then, if there is enough reader support, we plan on moving to an exclusive subscription-based model for the full Got Gold Reports.  We are gratified and humbled at the large number of unique visitors in just the first several days it’s been around.  Tracy tells me that the number of visitors vastly exceeded her wildest expectations and there are already numerous comments from new readers in the comments section.  We sure are proud to have your company there.

One Vulture Prospect    

We remain on the hunt for special situations and “vulture opportunities” via “stink bids” for obvious lack-of-liquidity, non-news-related, over-reaction sell-downs on the miners via our Vulture Bargain Hunter Method.  Companies we believe have been sold down too far with longer-term high-percentage recovery possibilities. 

As long-time readers know we track and chart somewhere in the vicinity of 80 companies in the resources exploration and production business, and, as good Vultures, we prefer to take our positions in them shortly after they have made what we think are “bottom consolidations” or “after trauma” consolidations.   The idea is to accumulate the companies when they are out of favor, but have the potential to come back into favor some day.  It can be a really “fun” way to play, but takes patience and tenacity, so it’s not for everyone and certainly not for the hot-money day-trading crowd. 

All of the companies we track made it onto our list as the recommendation or former recommendation of the best gurus in the small resource company business.  We track them sometimes for many months or even years before we ever attempt a trade with them.  Watching, waiting patiently, for a particular setup that has worked very well for us in years past.  There more to it than that (a great deal more as the clients who saw our presentation at the New Orleans Investment Conference last year will attest to) and we will be discussing it more once that portion of the new web site is up and functioning.            

Our valued readers will find much more technical and fundamental commentary in the linked charts just below.  

Got Gold Report Charts

·         1-year daily gold

·         2-year weekly gold

·         1-year daily silver

·         2-year weekly silver

·         1-year daily HUI

·         3-year weekly HUI

·         1-year daily HUI:gold ratio

·         2-year weekly HUI:gold ratio

·         2-year weekly U.S. dollar index

·         3-year weekly CDNX index

·         2-year weekly CDNX:HUI ratio

·         2-year weekly CDNX:gold ratio

·         6-month gold:silver ratio

The Vulture Comment 

One final Vulture comment.  We are not surprised in the least that this current breakout attempt for gold has been strongly opposed by the big short sellers on the COMEX.  We believe THEY believe they can “worry” the market back down with the weight of their own futures trading and in OTC forwards.  But we also know and believe that we cannot expect the gold market to advance strongly without buying pressure coming from both sides of the gold battlefield – those betting on the upside long and those forced to cover their downside short bets at the same time. 

And, if, that’s if, enough of the largest bullion longs in the market really do decide to stand for delivery of physical metal sometime in the next few weeks and months, then the sky is the limit for gold and silver prices if what we are now learning from GATA and others about the amount of bullion available for actual delivery is true.  The link to GATA is in the second paragraph.  It’s Game-On in the bullion biz as we send this out to the faithful.    

That’s it from Houston this week.  Until next time, thanks for honoring us with your time, good luck, good trading and as always, MIND YOUR STOPS.  Got Gold? 

The above contains opinion and commentary of the author.  Each person should study the issues carefully and, as always, make their own informed decisions. Disclosure:  The author and/or his family currently holds a long position in SPDR Gold Shares, net long  iShares Silver Trust, long the following “Vulture Bargain Hunter Stocks” mentioned in this report or within the last year: Timberline Resources (TLR), Paragon Minerals (PGR.V), Forum Uranium (FDC.V), Odyssey Resources (ODX.V), Terraco Gold (TEN.V), Hathor Uranium (HAT.V),  Gold Port Resources (GPO.V), Bravo Venture (BVG.V), Millrock Resources (MRO.V), Atna Resources (ATN.T), Riverstone Resources (RVS.V), Premium Exploration (PEM.V), Constantine Metal Resources (CEM.V), Canadian Shield Resources (EXP.V), Rye Patch Minerals (new) and currently holds various (approximately 15) other long and occasionally short positions in mining and exploration companies. The author receives no compensation from any company mentioned in this report.  To contact Gene use LLCCMAN (at) AOL (dotcom).    

A land developer, professional numismatist, self-taught bullion trader and investor since 1980, Gene Arensberg analyzes technical and fundamental developments in the precious metals markets.  In 2000 Gene started sharing his own market research with fellow traders and fund managers.  Those email reports evolved into his popular Got Gold Report, a biweekly look at important indicators for gold and silver published on the web. Gene’s more in-depth market reports, insights and trading ideas are available at www.GotGoldReport.com.   

-- Posted Monday, 12 April 2010 | Digg This Article