While the price of gold recently hit an all-time high of $2,200, what is happening in the gold market is shocking. James Turk has highlighted an intriguing development with gold ETFs that has left many precious metal owners puzzled. Despite gold reaching record highs, the weight of metal recorded in ETFs has been declining worldwide, a surprising contradiction to most expectations.
The weight of gold recorded by ETFs globally peaked at 3930 tonnes in November 2020, dropping to about 3120 tonnes currently. This significant 810 tonne decline has translated into a drop of approximately $56 billion in gold ETF assets. The decline in metal weight in ETFs has continued even as the price of gold surged to new heights, perplexing many industry observers and investors.
James Turk sheds light on the underlying dynamics of gold ETFs, revealing that some are not necessarily backed by physical gold as commonly assumed. He points out that while some ETFs may own gold, there are loopholes in the prospectus that allow for complex financial arrangements, including gold lending. Turk emphasizes the importance of owning physical metal to avoid counterparty risk, a factor driving the current trend in the market.
As more individuals seek to safeguard their wealth outside the traditional banking and currency system, they are turning to physical gold ownership, contributing to the record high prices. Turk predicts that this trend will persist, with the increased global demand for physical metal propelling gold to further highs. Additionally, he anticipates a similar trend in silver prices, reflecting the shift towards tangible assets and away from ETF shares.
The evolving landscape of the gold market underscores the changing dynamics driven by investor preferences for physical ownership and the implications for traditional ETFs. As the market continues to adapt to these shifts, the quest for safe-haven assets remains a key driving factor in the unprecedented trends witnessed in the gold market.
