Death Of Paper Gold Picks Up Speed Big Time Today

The death of the paper gold market picked up speed today as Blackrock announced that issuance of new Gold IAU ETF shares was suspended. However, it’s much worse than the information in news release when we factor in the total supply and demand situation.

According to the article on Zerohedge, BlackRock Suspends ETF Issuance Due To “Surging Demand For Gold”:

BlackRock’s Gold ETF (IAU) has seen fund inflows every day in 2016 (no outflows at all) and with the stock trading above its NAV for most of the year, the world’s largest asset manager has made a significant decision:
•*BLACKROCK SAYS ISSUANCE OF GOLD TRUST SHARES SUSPENDED
• *BLACKROCK SAYS SUSPENSION DUE TO DEMAND FOR GOLD

Now, why is this so interesting? Because, this now suggests a tightness in the paper gold market due to the last several years of surging physical gold demand…. especially now that China has recently become an “official” Central Bank buyer of gold.

If we look at the increase in Blackrock’s iShares IAU ETF gold inventories, they have increased 1.2 million (Moz) in the first 2 months of the year:

The iShares IAU ETF held 4,905,600 oz of gold at the end of 2015, but this jumped 1.2 Moz to 6,133,283 oz presently. This is nearly a 25% increase in gold inventories in only two months. As we can see, the outstanding shares increased from 508.1 million Dec 31st 2015, to 635.6 million shares currently.

In order for Blackrock to issue more shares of its gold IAU ETF, it will need to acquire more physical gold.Blackrock’s news release also stated the following:

February marked its largest creation activity in the last decade.

This surge in demand has led to the temporary exhaustion of IAU shares currently registered under the ’33 Act. We are registering new shares to accommodate future creations in the primary market by filing a Form 8-K to announce the resumption of the offering of new shares.