Gold ETFs hold more gold than Swiss central bank

February 16, 2009

Commodity Online
MUMBAI: Across the world, most commodity markets are down in the dumps because of the economic slowdown and crude price crash.

When all other commodities are down with little prospect for a quick price recovery, the eternal favourite of investors is gold. Proof for that is clear when you check the data. Price of the yellow metal has appreciated steadily, despite reasonably strong dollar and overall weak sentiment in commodity markets.

Gold price rise is despite decline in jewellery demand. There has been a dramatic increase in appetite for physical gold among investors.

Total exchange traded product gold holdings have risen at their fastest ever rate so far this year, growing by 200 tonnes to almost 1,400 tonnes. Interestingly, gold ETFs now hold more gold than the Swiss central bank! Gold held by ETFs now account for more than 40 percent of identifiable gold investment globally.

The biggest gold ETF holder is the NYSE-traded SPDR Gold Trust that hit a record high of 894.72 tons last week, an increase of 14 percent above the month-earlier level. Other gold ETFs around the world together held over 480 tons.

Here are the best gold ETFs globally:

**Listed on the New York Stock Exchange in November of 2004, traded on NYSE Arca since December 13, 2007, SPDR Gold Shares now also trade on the Singapore,Tokyo, and Hong Kong stock exchanges.

**Another, somewhat smaller gold ETF, the iShares COMEX Gold Trust, with holdings of 68.72 tons (2.21 million ounces) as of February 10th, is also listed on the New York Stock Exchange.

**There are also other smaller gold exchange-traded funds are also traded on a number of stock exchanges around the world, including Australia, France, Mexico, South Africa, Switzerland, Turkey, the United Kingdom and India.

Gold coin sales are also soaring with sales by the US Mint reportedly running at double their levels a year ago. The uptrend in gold may continue as long as investment buying remains sufficient to offset weakness in jewellery demand.

Even if there occurs a broad commodity market revival with return of risk appetite, gold may not really suffer badly. An upside risk to crude prices, inflation expectations and imminent weakening of the dollar would continue to support the yellow metal.

In the short-term, however, in the event safe haven buying eases for any reason, gold prices could come under pressure especially in a deflationary environment or during bouts of dollar strength.

While the market is likely to struggle at or near $ 930 per ounce, there is expectation that it will ultimately break, as the metal continues to shine on an absolute and relative basis.

Rising international prices of gold and weakening Indian rupee have combined to push domestic market prices through the roof. Gold 10 grams reached an unprecedented rate of Rs 14,900. Given that higher prices lead to demand compression in price sensitive markets such as India, physical demand for household consumption is reduced substantially.

India’s gold imports are sure to shrink further as high prices show no sign of abating. Of course, speculators who closely track overseas markets have a field day.

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