Thursday, 15 March 2012

Gold ETFs snapped-up in London on Thursday

Despite increasing fears that the gold price will fall further shares in UK physical gold exchange traded funds (ETF) were being snapped up on Thursday - with £60 million in net buying via automatic trades. After the London Stock Exchange closed the spot price of gold carried on upwards and is now trading around $1,658 or £1,056 after hitting $1641 lows earlier in the day.

Two articles from Seeking Alpha outlined some of the fears about further price falls. Ananthan Thangavel's piece "Gold and silver have further to fall" and Independent Investor's "3 reasons why gold could drop another 30%". (I spent most of January believing the scare stories and will probably do it again.)

Yesterday I also read a positive longterm piece from Dylan Grice at SocGen (FTalphaville on an earlier piece):

"Some would say the time to sell is now. Gold just isn’t the misunderstood, widely shunned asset it was a few years ago. Isn’t the gold bull market now long in the tooth, with better opportunities to be found elsewhere? I can understand this view. Had you bought stocks at the bottom of the bear market in 1974 and held them for ten years you’d have seen them go from being hated to being loved. And as the number of mutual funds exploded you could have plausibly argued that since stocks were no longer the deeply contrarian plays they’d been, they should be sold. But you’d have missed spectacular gains over the next 15 years because the social contrarian indicators said nothing as to how favourable underlying conditions were for risk assets."

He also said: "It’s all very well for economists to point out that the cure for runaway inflation is simply a contraction of the money supply. It’s just that when you look at inflationary episodes you find that such monetary contractions haven't been politically viable courses of action."

Gold ETF investors in the UK seemed to be on the side of Dylan Grice today.

ETFS Physical Gold (PHAU), of which I own a tiny piece, was the most mild-mannered with net buying at around £2.5 million with buy orders worth about £6.5 million compared to sells of £4 million.

The physical gold ETF from Source (SGLD) saw net buying of about £11 million with £19.5 million bought and £8.5 million sold.

Gold Bullion Securities (GBS) saw net buying of £34 million (£37 million of buy orders and £3 million sells)  

 ETF Securities' sterling denominated physical gold ETF PHGP was equally impressive with £14.5 million in buy trades and £0.17 million worth of sales. This ETF is thought to be a favourite among retail investors, often in the top ten list on Hargreaves Lansdown Top Stocks list, and its £14 million buy trades were divided into 140,000 separate trades while SGLD's £19 million buying was spread over 120,000 trades.

BullionVault's market report Gold price bounces,"looks vulnerable", as treasury bonds fall again, Indian demand rallies (15 March 2012).

It included a quote from Russell Browne at bullion bank Scotia Mocatta saying "Gold dropped bearishly [on Wednesday] through our Fibo support level (a number series used by some technical analysts to spot important prices).... the next key support level at 1625."

He said: "A definitive close below this support level opens up a full retracement to the December low of 1522."

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