One Chart That Gold Bugs Do Not Want You To SeeBy on 2013 Nov 2 Sat 13:40:34
GLD’s net asset value in ounces has been dropping non-stop. As of October 30th 2013, it just made another new low print for the year. Notice that the surge in NAV in ounces has happened before every major rally in GLD and gold. Until we see evidence that GLD has its NAV settle down, it will be very difficult for gold to run much higher. The last leg up in gold price from $1600 to $1900 did not happen with increase in NAV in ounce. We all know what happened since – it turned out to be the finally top for the mega gold rally.
Classic market crashes take down all those who bought their papers with the others at speculative price levels. From the chart, we can see that the NAV in ounces surged the most after crossing the 25 million ounces level back in end of 2008 / the beginning of 2009. I think we have to wait until the NAV in ounces dropping down to the 25 million level again before gold price will find a decent bottom.
Remember that gold price itself may not need to drop as much as the NAV. It is all about cleaning out the ones who speculate beyond their means.