Huge Trend Changes Point To Something Big In The Gold Market

Very few precious metals investors realize how recent trend changes will greatly impact the gold market going forward.  The reason many investors fail to grasp the huge change in the gold market is that they look at data or information on an individual basis.  To really understand what is going on, we must look at how all segments of the market compare to each other… a BIRD’S EYE VIEW.

Let’s start off with one segment of the gold market that has changed significantly in the past 15 years.  The Global Gold Hedge Book hit a peak of nearly 3,100 metric tons (mt) in 1999:

Global-Gold-Hedge-Book

(chart courtesy of the World Gold Council)

Here we can see that after the Global Gold Hedge Book peaked in 1999, it fell to a low at a little more than 100 mt in 2013.  Not only was this a significant change in the hedging strategy of the gold mining industry, it also was impacted by the price change from an average price of $279 in 1999 to $1,411 in 2013.

So, as the price of gold jumped five times from 1999 to 2013, the Global Gold Hedge Book fell 96%.  Even though it increased a bit in the first quarter of 2016 to the present 253 metric tons, it’s still a fraction of the massive hedge book the gold industry held in 1999.

Now, if we add another segment of the gold market, we will see another large trend change.  Global Gold Bar & Coin demand increased significantly since 2000.  In 2000, total Global Gold Bar & Coin demand was 166 mt.  However, this hit a record high of 1,705 mt in 2013:

Global-Gold-Bar-Coin-Demand

If we were to super-impose the Global Gold Hedge Book chart with the Gold Bar & Coin chart, we would see an interesting trend.  As the gold industry’s hedge book fell to a low in 2013, Global Bar & Coin demand hit a peak.  Furthermore, if we consider the net change in Central Bank Gold purchases, it’s even more interesting:

Central-Bank-Offical-Net-Gold-Purchases-2003-2015

When the gold industry held a very large gold hedge book, Western Central Banks were dumping gold on the market HAND-over-FIST.  I imagine this was a two-tiered approach in controlling the gold price.  We can see that in 2003, Central Banks dumped 620 mt of gold into the market and another whopping 663 mt in 2005.  However, this all turned around in 2010, when (Eastern) Central Banks became net buyers of gold at 79 mt.

Moreover, Central Bank gold purchases also hit a record 625 mt in 2013 along with Gold Bar & Coin Demand of 1,705 mt.  These two record gold demand figures took place the very year the Global Gold Hedge Book fell to a record low.

While these three different segments of the gold market provide the investor with a different understanding when we look at them all together, there is another factor that is even more compelling.

Global Gold ETF Demand Is The Major Trend Changer

Even though investors don’t trust a lot of the figures coming out of the Gold ETF market, it is by far the most critical factor in the gold market going forward.  Why?  Because this is where the Main Stream Investors enter in BIG NUMBERS.

This chart shows the change of Gold Bar & Coin demand versus Gold ETF demand in the past two quarters:

Change-In-Global-Gold-Investment

Even though gold went up $200 in the first quarter of 2016, Gold Bar & Coin demand actually declined from 272 mt (Q4 2015) to 254 mt (Q1 2016).  However, Global Gold ETF’s saw a huge spike in demand from a negative 68 mt in Q4 2015 to 364 mt in Q1 2016.  While Gold Bar & Coin demand fell 7% in Q1 2016 compared to the previous quarter, Global Gold ETF’s experienced a huge 300+% increase.

Okay, I realize many investors don’t trust the data put out by the World Gold Council, but its the best we can go by.  Even if the data is manipulated or under-reported, the trend changes discussed here are important to understand.  Furthermore, if the figures are manipulated, then the trend changes are even more severe and bullish for the gold investor going forward.

Regardless, the big change of Global Gold ETF demand will be the major factor to focus on in the future.  It won’t matter if the GLD ETF has all the gold it states, spiking demand in this sector will be the factor that overwhelms the entire market.  Again, if we look at the chart above we can see that Gold Bar & Coin demand did not really increase during the $200 gold price increase.  Which means, the 1% of investors who have been acquiring physical gold for years didn’t feel motivated to buy much more.

On the other hand, FEAR entered into the Main Stream Investor as the broader stock markets were crashing during the first quarter of 2016.  This was the motivation of the main stream investor to get into the safety trade of gold.  I see this segment of the gold market surging as the Dow Jones finally falls off a cliff.

Lastly, the gold market was in serious trouble at the end of 2012 when the price of gold hit an average high of $1.669.  This is why the gold price was knocked lower in 2013 and lower still over the next two years.  This forced gold out of the Global Gold ETF’s.  This last chart represents Net Global Gold Investment since 2013:

Total-Net-Global-Gold-Investment-Demand

Even though total Gold Bar & Coin demand for 2013 was 1,705 mt, when we subtract out the outflows from Global Gold ETF’s, total net gold investment was only 885 mt.  This figure does not include Central Bank purchases.  By pushing the price of gold down for the past three years, gold was taken out of Global Gold ETF’s to supplement the market.

However, this all changed during the first quarter of 2016 as Global Gold ETF demand surged to 354 mt versus a negative 68 mt in Q4 2015.  Thus, total gold investment for Q1 2016 is already 618 mt.  What happens for the next three-quarters?

Take a look at Global Gold Holdings over the past 10 days:

Gold-Holdings-May-17-2016

What is interesting here is as the price of gold declined from $1,289 on May 6th to $1,277 on May 17th, total Global Gold Holdings increased 1.8 million oz (shown on the dark blue line).  Basically, Gold ETF’s, similar products and exchanges total inventories increased from 75 million oz to 76.8 million oz as the price of gold declined.

This means investors are still highly concerned about the economic and financial markets to move into gold investments as the price declines.

Keep an eye on Global Gold ETF demand going forward.  This will be the key that totally overwhelms the gold market in the future.

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29 Comments on "Huge Trend Changes Point To Something Big In The Gold Market"

  1. Not the main price driver, that’s the commercials with fed still FULLY in control, as usual.
    Miners destroyed. Seems the slaughter just began…

    • I forgot, stocks closed green : unbelievable sign of strenght and maket control.
      Here is a lesson for all the clowns with “fed is cornered” mantra or for chinese panicked leaders !

      • I have already writen that PMs only reached resistance whereas “pundits” claimed that a new bull market started. Two days were enough to prove me right.

  2. Sad story. Mom and pop buying paper gold, how many claims per ounce in the average exchange traded fund?

    https://4.bp.blogspot.com/-W5a7DhaJr8E/Vt8062hiXnI/AAAAAAABIG4/hE4hQ1nOh0U/s1600/comexstockpileaurnoor05.php.png

    On the Comex it spiked above 500 in a blip.

    Dear ‘mainstream investor’, prepare to share your gold with at least 200 others when the time comes.

    If you don’t hold it, you don’t own it.

    • Comex is in full control with NO delivery issue as nearly forbidden in fact even with 1000 leverage and now it is a paltry 100.
      Be reeady for another total commercials victory. It is going to be a massacre for longs…

      • I really don’t care. Paper promises are what they are; promises.

        It will blow like dust in the wind when fundamentals collapse for everyone to see. They probably can keep it up until 2020, maybe a few years later.

        • Agree, maybe sooner but still in control for several more years.
          Shanghai will have still no power and will much probably still continues to act like financial eunuchs at that time !
          I remember a few months ago when all these clowns were speaking about the new yuan gold fix : they are going to break the cartel.
          BRICS will continue their downside into tbe abyss in the world financial power.
          What a bunch of a..holes…

          • robertsinclair | May 19, 2016 at 1:02 am |

            Getting desperate.
            The great ponsi scheme goes ever forward, destroying real productive industry in its wake.

          • James in NY | May 19, 2016 at 4:44 pm |

            It’s totally criminal.
            No fear, eyes wide open.
            If only “Old Hickory were here”.

  3. The demand for gold is being diluted by ETFs in my opinion and that is one way that the price of gold is being held back. Instead of all the demand going into physical gold and the price of gold rising as a consequence these ETFS are expandable buffer zones that can hold an unlimited amount of fictional gold. A perfect way to keep prices low.

    • hendrik1730 | May 22, 2016 at 12:12 pm |

      Quite right …. until the ETF gold owners require physical delivery because they don’t trust the whole ETF Ponzi scheme anymore. That’s as trustworthy as fiat paper money – it’s a Monopoly game.

      • But people would not have buy physical gold if this ETF paper gold would not have existed.
        The real issue has been fraudulent paper gold etf not the nature of this product per se.

  4. Last year the London Bullion Market, which based on trading volume is ten times bigger than the Comex, “cleared” 132,000 tons of gold. The London Bullion Market and Comex combined trading volume of gold last year was 1,485,400 tons. Considering that only 180,000 tons of gold have been mined in history, that’s a pretty neat trick. Total combined traded volume of gold in 2015 from the US/UK was eight times higher than all the gold ever mined in history.

    http://visual.ly/us-gold-market?utm_source=Community&utm_medium=SocialMedia&utm_campaign=TweetShare

    http://visual.ly/london-gold-market?utm_source=Community&utm_medium=SocialMedia&utm_campaign=TweetShare

    Research by Ronan Manly recently revealed that as at the end of 2015, 5700 tons of gold remained in the Bank of England and other London vaults, down from 9000 tons in 2011. If you subtract out Central Bank Gold and ETF gold stored in London, there is NO actual “gold float” left to back the unallocated LBMA Gold accounts through which the 1.3 million tons of paper gold are traded in London each year. How much of the 5700 tons of gold claimed to be held in London, the centre of the global gold markets, has been swapped or leased out or otherwise encumbered? How much of the 5700 tons is physical gold and how much gold receivables?

    https://www.bullionstar.com/blogs/ronan-manly/how-many-good-delivery-gold-bars-are-in-all-the-london-vaults-including-the-bank-of-england-vaults/

    https://www.bullionstar.com/blogs/koos-jansen/london-was-bleeding-184t-of-gold-in-december-3rd-highest-ever-while-china-imported-at-least-217t-highest-ever/

    Actual physical gold cleared in London every day is only 3-4 tons of which the vast majority is gojng to China via Chinese banks. ICBC Standard Bank (Chinese) has recently acquired two large gold vaults in London from Deutsche Bank and Barclays with a combined capacity of 3500 tons. Last year China imported about 1400-1500 tons of gold. From what Rob Kirby, Andrew Maguire, V and others have said who are actively involved in procuring gold for clients, gold supply has never been tighter. I seriously doubt that these latest ETF gold holdings figures are legitimate or accurate in any way whatsoever.

    The Chinese are draining the swamp in London and when the gold runs out US/UK paper gold/silver shenanigans will stop.

  5. I enjoy the analogy of musical chairs.

    The band will not play forever. Let them be merry and dance to the markets.

    When the tide goes out we will see who sports the real assets…..

    • James in NY | May 19, 2016 at 4:47 pm |

      Yes, let’s be happy we can continue to stack and welcome the gift of manipulation while we still can.

  6. silverfreaky | May 19, 2016 at 3:54 am |

    A bad stroke to my minerstocks.-20% very quick.When will it stop?

    • Depends on the commercials position at the end of the correction.
      US stocks going to explode higher, yes higher !

    • An act of true desperation from jim sinclair, not comex commercials or western central banks :

      Dear Comrades in Golden Arms,

      I was there and considered by some to have been the largest gold trader from 1968 to March 1980. I recall every day of it like it was yesterday.

      NOW:

      I do not believe that gold has registered its all-time high by a long shot.
      I do not accept the recent decline from above $1900 as a gold bear market.
      I believe all accepted tools for market timing will fail in the long term super bull market.
      I believe the recent long decline to be but a reaction in the giant bull gold market.
      Into a new New Normal, all previous relationships between gold and anything will not apply.
      The basic motivator of new gold prices to come finds it basis in the physical gold market, not in the paper gold market.
      The 1% are not stupid or in the main would not have the positions that they have if market jerks.
      Knowing without any doubt what is about to occur, they have been for 8 years cleaning out the physical market.
      China and Russia are not gold speculators, but know exactly what is about to occur, having made it a policy to accumulate gold on a continuing basis.
      Like China and Russia, the right time to buy gold and therefore silver is when you have spare cash to do it.
      The demand for physical gold will eventually overcome the physical market, forcing deliveries to be taken on all the world’s paper markets and demanded in the forgotten large OTC derivatives of gold, written naked.
      The sign that this is taking place will be the ever increasing margin requirement of paper gold until it hits 100%.
      At that point the paper exchange is no longer a paper exchange but rather a physical exchange because physical gold supply will trade at a large premium to paper gold.
      This is the point in time when the question will be asked what is the value of a metals contract that cannot perform, the paper gold contracts.
      The answer to a non-performing contract is that its value is zero.
      Paper gold will trade down to the value of the paper it is written on, zero.
      At that time the value of physical gold will be whatever the major owners of physical wish it to be.
      The value of gold producing companies still functioning will be determined by their over the ground stored physical at full gold value and its underground gold at a modest discount to the stockpiled gold.
      Very few gold miners can grasp that concept. Investors do not have a clue.
      Talking heads seem to be getting a hint that something has changed in gold but have no clue as to why.
      This transmutation of what gold is, is happening right now, not some time in the future.
      The gold market is reflecting this in this minor recovery, making all fishing line market movements a great buy while gambleholic traders still can sell modestly into Rhino horn moves up.
      I do not think trading is correct because the final change will come overnight. You will go to sleep in one financial market and wake up the next day in the new New Normal financial world where gold, not paper, is King.
      The 1% makes this one of the first choices of assets to own on their decision tree.
      This explains the strange action of gold with the manipulators to the dirty work of their masters.
      As the paper price of gold is capped, the 1% are the major buyers on the physical metals, mostly direct from refiners and producers.
      This means that trillions of paper dollars need to be covered.
      The USDX may well be the most useless indicators of the value of the dollar.
      The value is not to be registered against other fiat currency, but rather in buying gold versus gold.
      As such, the USDX falls out of its traditional relationship to gold. This also reduces the SDR to a joke.
      Therefore the 1% is on the bull side of gold in the physical market while the Banksters have been on the short side of the gold price via paper.
      Time is running out for the short of paper gold to be a riskless trade with the Federal Reserve at its back. The intrinsic value of the silver and gold contract is zero and zero cannot fulfill the contract obligation of the paper gold contract. That is how the paper metals exchanges go boom. Therefore zero value for a delivery month on paper gold or silver is zero profit to the short of gold and silver paper contracts.
      All those long gold anything will have the wind at their back for a long and deserved change.

      Questions are answered by Bill and I on the premium service where we have recorded numerous conversations on

      what may well be the most important subjects you need to understand. Some of these conversations have over an hour of in-depth material.

      Best Regards,
      Jim

      • robertsinclair | May 19, 2016 at 8:04 am |

        You seem to have plenty of time on your hands and favour the destruction of free markets and with it the ultimate destruction of amerika. The more interferance, the sooner the demise and the greater the fallout.

        • That’s quite calm indeed at work currently !
          I am not for the destruction of the free markets, there have NEVER been any, I am for the destruction of the idea of market itself !
          However, I have to disagree with you, western central banks are pure genius and have not accelerated the demise of the control markets, they have succeeded to expand them (whatever their form and the way they perform and are controled) way beyond (in term of duration) what could have been imagined a few decades ago.
          Without them, capitalism would have disappeared at the end of the previous century (in the late sixties).
          Central bankers are the keeper of the capitalist paradise keys, their mission is to enable all non capitalist people to accept without discussion to continue to bow in front of the power of money, exchanges, markets, politics, states, economics, which all the same system of domination.
          Considering the 100 fold increase in productivity (it is probably much higher because lots of today human activity is useless such lawyers, accountants, bankers and so on) for the beginning of the so called industrial revolution, every human should produce about the same time that primitive communities ie less than 3 hours/day with basic human needs fulfilled even for the “disabled” ie food (quality food), some energy (heat and some transport), clothes, roof and basic equipment and tools.
          Amerika deserves better than free markets, humans living in Amerika deserves to go back to… humanity !

        • James in NY | May 19, 2016 at 5:28 pm |

          We don’t have free markets, we have rigged markets. America ceased existence in 1913, without a shot fired she was bound, gagged, and thrown in the Hudson River. What we are living isn’t America. The longer this ponzi scheme goes on, the greater the impact and destruction. Not the opposite.

          That’s my opinion on it anyway.

          • The 19th century is often presented as idyllic and glorified but this was also an awful times. Regarding the dirty world of money, it has been era which led to the complete capitalism/money triumph all over the world and human brain; heart and soul.
            Free markets are often presented by libertarian as the great architect of the universe moved by the rational individual just restrained by religion : if only we could find again the chastity of the free markets before the states, the banks, we will be saved and the world will experience nearly paradise on earth.
            Unfortunately, it has not really happened like that and also, everything we can see today took its origin into this time and the general rules of money and capitalism : the current state of the world is not an accident of history or because rockfeller, politicans, banks are bad people : yes they are (especially when using war as a tool) but they just follow the general rules of their interests. Even if ford CEO and the shareholders would want to increase the wages of this company by 20%, ford would be doomed nearly immediately and most would be fired consequently.
            Capitalism is morphing all over the world into a mix of social democraty defined as the german way with some orwellian USSR components, the speed is not the same everywhere and there are still some historic and local particularities, but it converges to the same kind of state controled by major money interests with constant propaganda (also in the BRICS) with peripheric wars (syria, libya, sudan etc).
            Why despite massive opposition from example between russia and NATO ?
            Because this system is the where the democratic tyranny of money finds the best environment to prosper.
            Some like jim willie states that the eastern free masonry wants to build world peace through commerce and meritocracy : it is exactly the SAME program that french revolution proponents which led to awful 19th european century with the rise of the capitalist class, colonization, commercial wars (opium war for example). War was and is anymore just the ulimate commercial war when one feels he is losing by commercial and money standpoint. For example, Britain had bought some french goverment people in order to declare war against germany in 1870.
            Money is not only an account of value of a reserve of value (human work crystallized) but first a social relation which cannot be mastered. State, especially the modern one is there in order to protect the interests of the ruling class (through police and through taxation especially for the middle class), the reason why state is deeply involved into social engineering and massive propaganda.
            It is not only central banks or fiat currencies which must be refrained or destroyed it is the symbiotic evil couple of money/state (whatever their form).

      • Very well said!

  7. silverfreaky | May 20, 2016 at 12:30 am |

    All our dreams fade away.In a time where the buisness banks get unlimited money from the central banks PM never will perform.

    They can do what ever they want.Those charts are completely irrelevant.Only the Bankster himself can stop this or a big entity will crash the paper market with cornering the physical market.Both is not in sight.

    • It can perform only if that is their interest at some time, this cannot be ruled out.
      Moreover the BRICS capitalists could have opposite interests of western banking cartel.
      Unfortuantely for us, as I stated so many times, BRICS is runned by snails(one decision/year in average with endless talks like for their development bank or the so called holy grail deal between china and russia)) which are also funnily hermaphrodite !

  8. Why is RD even here?

    • That’s a good question indeed !

      I can see a few reasons : still good for mind to have different way of think inside a forum : to be long gold/short fiat or long fiat/short gold is about the same thing ie the two sides of the same coin.
      I am just trying to put some simple thoughts (not from me obviously) in order to say simply, that gold and silver are not going to “save the world” and restore the world as it was one, two or even five centuries ago.
      In the meantine, it is what it is and we have to live without “stealing” and “cheating” more than the system allow legally to do, so I am here as I think that gold/silver still a little better than fiat but without much illusion as I wrote before…
      PS : another funny thing is that most of TPTB hates gold/silver, so that is very funny to contemplate some victory against the most recent social relation know as money.

  9. Been buying for Years….Slowly but Not lavishly, silently stacking. Talking Heads are of no concern. I know in my Heart what is happening to this bankster/ criminal politician run world.

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