The barrage to get investors to dump their gold is on in full force, after one after another media outlet takes turns to guarantee that a day of profit taking in an asset that two days ago was trading at its time highs, and experienced an uninterrupted 30% run in the past year, means the rally is over pretty much in perpetuity. The motive is clear: get people to abandon the safety of hard assets and throw their lot into the ponzi scheme, based on one week of minimal inflows following endless outflows after the first and certainly not last Flash Crash. The latest such attempt comes courtesy of Bloomberg's chart of the day, whose disturbed logic is just left of alchemy. To wit: the shares outstanding of the GLD etf have declined, therefore you must acquit, or dump your gold. Immediately. And we wish we were kidding.
Gold investors are showing “a lack of conviction” about the potential for further price gains after a decade-long surge, according to Vadim Zlotnikov, Sanford C. Bernstein & Co.’s chief market strategist.
The CHART OF THE DAY illustrates how Zlotnikov drew his conclusion: by comparing the price and shares outstanding for the SPDR Gold Trust, the world’s biggest exchange-traded fund backed by gold bullion.
While the ETF’s price climbed 13 percent from the end of June through yesterday, the total number of fund shares dropped by 2.8 percent. There were 421.7 million shares as of yesterday, according to data compiled by Bloomberg.
The decline contrasted with a trend since 2007 in which gold prices and the share count rose together, Zlotnikov wrote today in a report. The trust’s outstanding stock almost tripled during the period as gold soared to records, capping the metal’s five-fold increase in the past decade.
“We have been observing some loss of steam behind gold ETF inflows,” he wrote. “It seems particularly noteworthy” that the Federal Reserve’s decision to carry out a second round of bond purchases, or quantitative easing, failed to boost demand for the SPDR shares, the report said.
The gold trust creates and redeems stock in blocks of 100,000 shares, known as baskets, by trading with authorized institutional investors. The number of shares outstanding peaked at 433.9 million at the end of last year’s second quarter.
Next up: Bloomberg's chart of tomorrow, will show why the color of the solar wind as interpreted by Bob Doll, means today's freak red close will be the one and only correction of the year.
As for gold, investors are hardly concerned. After all, Buy the Fucking Dip works for other asset classes, not just stocks.