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
How ironic that the central banks tinkering with economies has only resulted in a complete mess, when everything would be better if they just did nothing. While there is an argument for a conspiracy there, Hanlon’s Razor holds that it is more likely just stupidity.
More evidence that gold responds well during deflation. Do you think that the scenario where bond yield’s are near or even below gold’s jucy yield of 0% makes this relationship infinitely more pronounced?
It has long been my stated position that gold does well in deflation.
Been knocked many time for that position but I am sticking with it
Mish
Obviously, reality is proving you right, Mish. These central banks are money supply cartels, just as OPEC is a petroleum supply cartel. If money were considered analogous to a drug, and these type of “quack solutions” had to undergo small-scale trials like drugs do with the FDA, then this nonsense would never happen. But here we have a case where QE and every negative interest rate trial is a failure (in terms of stated objectives). Yet like the addict or the abuser, it is more and more of the failed QE and now below zero interest rates. Central banking and governments are really out of control, like no checks and balances. No doubt, these inane schemes banning cash will be next; and when that doesn’t work, no doubt something like FDR’s 1933 gold confiscation. You don’t need to be an Albert Einstein to see that when you confiscate people’s means of monetary exchange that the pace of economic exchange and the economy itself will be lower. Medieval Idiocy and Modern Idiocy seem one and the same. I have to wonder what the end game is here, if there is one.
Do you think that the scenario where bond yield’s are near or even below gold’s jucy yield of 0% makes this relationship infinitely more pronounced?
There is certainly a chance the Fed goes negative
They are openly commenting on that possibility already
Mish
The “kings” of the global economy appear to be waking up to that barbarous relic, gold. When their peasants similarly ‘wake-up’ (too late), silver will explode.
“First time caller line, you’re on the air with Coast To Coast, go ahead… ”
“Yeah, George, thanks for taking my call. I wanted to ask you about what you said Wednesday night about silver. Could you repeat it? ”
“Oh, my God, what DID I SAY? Our sponsors were all over me today with that same question! Everyone is flooding them with, …requests for silver! “
The bullion banks and their cronies are now understanding that the limit has been reached on the decades long gold price suppression schemes. The vaults have been reduced to echo chambers; there is not enough gold available to satisfy demand. The Shanghai Gold Exchange will issue new gold contracts in April that will be physical, rather than paper based. When the elephant gets off the suppressed spring, gold will go “no bid”.
Factset today on Q1 S&P500 earnings …. Yikes!
“Earnings Growth: For Q1 2016, the estimated earnings decline is -8.0%. If the index reports a decline in earnings for Q1, it will mark the first time the index has seen four consecutive quarters of year-over-year declines in earnings since Q4 2008 through Q3 2009.”
Earnings Revisions: On December 31, the estimated earnings growth rate for Q1 2015 [sic?] was 0.3%. All ten sectors have lower growth rates today (compared to December 31) due to downward revisions to earnings estimates, led
by the Energy sector
….
“Largest Drop in S&P 500 EPS Estimate Over First Two Months of a Quarter since Q1 2009”
http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_3.4.16
Well at least I will not be handing the banks money to keep my money in the banks. Gold is so shiny!!!
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IAU also has physical backing in their charter. They can’t extend shares beyond their physical holdings without a major round of charter modification. They do have standard procedures for procurement of more physical and issuance of more shares. It is also (hypothetically, per the fund charter) possible to redeem shares (in blocks of 10k share, IIRC) for physical. IAU may be experiencing a bottleneck in their ability to procure physical.