blog.milesfranklin.com / By Bill Holter / Published: February 7th, 2013
I can remember back in 2004 or 05 when the first Gold ETF “GLD” came out and everyone got so excited and then a year or two later the same thing with SLV. Everyone thought “this is a game changer.” It can be debated whether it was or was not. I personally believe that these two trusts have been used “against us” by shorting the very metal that was supposedly bought. I believe that these were used as pressure relief valves where monies meant to purchase metal …didn’t quite make it to the real thing and ended up being used to purchase some sort of newly created “paper instrument.” The “demand” in other words was diverted so as not to upset the limited supply.
China has recently announced their own version of a Gold ETF; THIS very well may be a game changer. But why would this be any different from other ETF’? Simply put, because I think that they will really and truly buy and store the physical metals like the Sprott trusts do. Think about this for a moment, if some of the existing ETF’s were really created as a pressure valve, there had to be “motive” behind it. The “motive” being a way to divert demand into paper and slow the rate that real supply dwindles and the price goes up. Remember, Gold is THE direct competitor of the Dollar which is obvious motive to want the price down and benign.
On the other hand, China clearly has aspirations of the Yuan becoming a major international currency and some day becoming a or THE reserve currency of the world. Yes I know, they have been accumulating Gold fast and furiously and do not want a sky high price but they also know that there is only so much to be had. Like any “operator,” it is possible that their accumulation period is ending and now they are ready for the “markup.” How better to do this than to encourage their 1 billion+ population to begin buying (which they have already done to some extent). Why not let their population “clean up” the supply? The Chinese are VERY intelligent people and probably know better than us “bugs” what the real deal is in the gold and silver markets so this hypothesis is probably not far from the reality.