Gold surged as high as $1280 per ounce amid horrific US export data and a jobs report that was nowhere near as strong as the headline number reads.
Topping off the action in gold, Blackrock suspended issuance of new shares in IAU, its gold trust ETF, citing a surge in demand for gold.
The Wall Street Journal reports BlackRock Suspends Issuance of New iShares Gold Trust Shares.
BlackRock Inc. on Friday said it has suspended the issuance of new shares in the roughly $8 billion iShares Gold Trust, citing a surge in demand for gold.
Existing shares of the gold trust will continue to trade despite the suspension of new share creation, the asset manager said in a news release. But the suspension could mean that the price of the fund will rise faster than the price of gold until share creation resumes, reflecting the premium that will likely accrue to existing shares, analysts said.
This could drive investors toward competitors’ products, said Mohit Bajaj, director of ETF trading at WallachBeth Capital LLC.
The investors are “going to be paying more of a markup,” said Mr. Bajaj, whose team trades the BlackRock gold product. “Our pricing is going to be much higher on the offer.”
A person familiar with the matter said BlackRock may not have foreseen the strong level of demand for gold and failed to register with the Securities and Exchange Commission to obtain additional shares. Under the Securities Act of 1933, subscriptions for new shares in excess of those registered requires additional filings with the SEC, investors said.
Gold the Beneficiary of Negative Rates
Worries about the stability of the global financial system has prompted a surge in gold prices.
Please consider Gold the Beneficiary of Negative Rates.
Investors are piling into gold, seeking shelter amid concerns that a turn toward negative interest rates in some countries is threatening to destabilize the global financial system.
Gold futures soared 4.45% to $1,247.90 an ounce on Thursday, its highest level in a year. Prices are up nearly 18% in 2016, making the precious metal one of the top performers this year after it lost 40% during the previous four years.
One of the biggest factors behind gold’s rise has been negative rates. The Bank of Japan last month joined a growing number of central banks, including the Swiss National Bank and the European Central Bank, when it introduced negative interest rates in an effort to spur consumer spending. Sweden’s central bank said on Thursday it was moving interest rates further into negative territory, and warned it could cut again. Canadian officials are also weighing cutting borrowing costs below zero.
And Federal Reserve Chairwoman Janet Yellen said this week the U.S. central bank is studying the feasibility of pushing short-term interest rates into negative territory if needed.
Gold typically struggles to compete with any yield-bearing investments when interest rates rise, but that disadvantage matters less when borrowing costs are negative, opening the path for more investors to hold the metal.
Gold remains the best hedge against central bank sponsored financial repression.
Mike “Mish” Shedlock