December 2, 2022

Silver and Gold ETF Holdings Both Decline On Week

Holdings of the iShares Silver Trust (SLV) declined by 248.69 tonnes for the week after declining by 27.12 tonnes in the previous week.  The year to date decline of silver held by the SLV is 1,256.05 tonnes.

The holdings of the SLV hit an all time high on April 25, 2011 at 11,390.06 tonnes and the decline from this high now totals  a substantial 1,724.54 tonnes.  Total holdings of the SLV have declined by 15.1% from the high of April 25, while the price of silver has declined by 27.6%  from its high of $48.70 reached on April 28th.

Silver closed today at $35.26 (as measured by the closing London PM Fix price), up $8.58 from the low of the year at $26.68 reached on January 28th.  Shares of the SLV closed today at $34.88, down $13.47 from the high of the year at $48.35.

 

SLV - COURTESY YAHOO FINANCE

The iShares Silver Trust currently holds 310.8 million ounces of silver valued at $10.95 billion.  At the start of 2011, the SLV held 351.1 million ounces of silver valued at $10.9 billion.  The holdings of the iShares Silver Trust does not directly track the price movement in silver due to the manner in which it is structured.  For a discussion of how SLV shares are created or redeemed by Authorized Participants, see How Wall Street Made Profits On Silver ETF Crash.

According to the iShares website, the SLV closed yesterday at a premium of 2.54% to the fund’s net asset value.  On rare occasions when silver is exhibiting large price swings, the premium or discount to net asset value has been as large as 6%.

GLD and SLV Holdings (metric tonnes)

June 15-2011 Weekly Change YTD Change
GLD 1,200.05 -11.52 -80.67
SLV 9,665.52 -248.69 -1,256.05

Holdings of the SPDR Gold Shares Trust (GLD) declined on the week by 11.52 tonnes, after declining in the previous week by 1.30 tonnes.  The GLD currently holds 38.58 million ounces of gold valued at $59.0 billion.  The all time record holdings of the GLD was 1,320.47 tonnes on June 29, 2010.

Gold traded in a narrow range over the past week, declining by $8 per ounce.  Gold has stayed above the $1,500 level since May 20th and has gained $141.25 since the beginning of the year.

Shares of the SPDR Gold Trust closed at $149.12, up $0.45, not far off the year’s high of $153.61.

 

GLD - COURTESY YAHOO FINANCE

Gold and Silver ETF Holdings Decline On Week

Silver holdings of the iShares Silver Trust (SLV) declined for the week by 27.12 tonnes after being unchanged in the previous week.  The price of silver, as measured by the closing London PM Fix Price has declined by $1.73 or 4.6% since June 1st.

After reaching a high of $48.70 per ounce on April 28th, silver has declined by $12.48 or 25.6% based on today’s closing price.  From the low of $32.50 on May 12, silver has seen a price recovery of $3.72.

The iShares Silver Trust has seen a substantial reduction in silver holdings of 1,007.36 tonnes since the beginning of the year when silver traded at $30.67.  The decline in holdings by the SLV from late April have been even more dramatic.   The SLV hit an all time high for silver holdings on April 25, 2011 of 11,390.06 tonnes.  The decline in SLV holdings from the all time high registers at 1,448.73 tonnes or 46.6 million ounces of silver valued at $1.7 billion.

The iShares Silver Trust currently holds 318.7 million ounces of silver valued at $11.5 billion.  On April 27th, the value of silver held by the SLV was $16.1 billion.

At today’s closing price of $36.03, shares of the SLV traded at a premium of $0.71 or 2.0% to the net asset value of the Trust.  Since the beginning of the year, the SLV has gained 20.2% and over the past year has increased by 115.4%.  For a discussion on why silver prices may see a quick recovery to all time highs see – How Soon Will Silver Hit New Highs?

GLD and SLV Holdings (metric tonnes)

June 8-2011 Weekly Change YTD Change
GLD 1,211.57 -1.30 -69.15
SLV 9,914.21 -27.12 -1,007.36

Holdings of the SPDR Gold Shares Trust (GLD) were little changed on the week, declining by 1.3 tonnes, after a decline of 1.21 tonnes in the previous week.  The GLD currently holds 38.95 million ounces of gold valued at $59.9 billion.  Holdings of the GLD hit at all time record high of 1,320.47 tonnes on June 29, 2010.

Gold prices gained slightly on the week, closing up $4.00 per ounce from the June 1 close.  Gold has now gained $149.25 since the beginning of the year, up 10.75%.  Gold has remained in a narrow trading range for several months, consolidating its early year gains.  Gold has remained above the $1,500 level since May 20th when it closed at $1490.75 per ounce.

Gold And Silver ETF Holdings Show Little Change On Week

Holdings of the iShares Silver Trust (SLV) were unchanged on the week after dropping by 505.10 tonnes in the previous week.

After extreme price volatility at the beginning of May, silver prices were little changed over the previous week.  Based on the closing London PM Fix price, silver closed at $37.17 on May 25th compared to a closing price of $37.95 on June 1st.

The price of silver has now recovered by 16.7% or $5.45 from the low of $32.50 on May 12.  Silver reached a high for the year on April 28th closing at $48.70.  The price correction should be viewed as a buying opportunity since the fundamentals of the silver market have grown stronger with each passing day.

The debt crisis in Europe and the U.S. appear to be on the verge of spinning out of control.  The latest batch of economic reports show weak employment numbers, decline in the manufacturing sector and a continued collapse in U.S. real estate values.  Economies overburdened by debt desperately require higher economic growth which is simply not happening.  The prospect of continued economic weakness was finally acknowledged by previously bullish stock investors, as sellers pushed the Dow Jones down by almost 280 points for a 2.2% loss.

The latest sales figures from the U.S. Mint indicate that many investors see silver as a better store of value than paper currency.  Total year to date sales through May 31st of the Silver Eagle bullion coins totaled 18.9 million ounces, the most since 1986.  Comparable sales of the Silver Eagle for 2010 were 15.2 million ounces.

U.S. Mint sales of the Silver Eagles during May totaled 3.65 million ounces up from 2.82 million ounces in April.  If sales for the rest of the year continue at the average month’s sales volume, U.S. Mint sales of Silver Eagles would total 45.4 million ounces, valued at over $1.7 billion based on today’s closing price of silver.

GLD and SLV Holdings (metric tonnes)

June 1-2011 Weekly Change YTD Change
GLD 1,212.87 -1.21 -67.85
SLV 9,941.33 00.00 -980.24

The holdings of the SPDR Gold Shares Trust (GLD) decreased by a modest 1.21 tonnes over the past week, after gaining 22.74 tonnes in the previous week.   The GLD currently holds 38.99 million ounces of gold valued at $59.8 billion.  The price of gold gained slightly on the week, closing at $1,533.75, up $7.50 from May 25th.

How Wall Street Pros Made Huge Profits On Silver ETF Crash As Small Investors Sold

The holdings of the iShares Silver Trust (SLV) declined by a substantial 505.10 tonnes from the previous week.  The decline in SLV silver holdings from the all time high of 11,390.06 tonnes reached on April 25th comes in at a hefty 1,448.73 tonnes or 12.7%.  Silver, meanwhile, has declined in price by $8.31 per ounce or 18.3% since April 25th.

Although the price per share of the SLV tracks the price per ounce of silver very closely, the actual bullion holdings of the SLV can fluctuate, sometimes dramatically, from the underlying price movements of silver.  This same situation applies to the SPDR Gold Shares (GLD).

The reason why the physical holdings of the SLV and GLD do not closely track the price of gold and silver is due to the complex mechanism by which Authorized Participants can “create or redeem” shares in the SLV and GLD.  The silver and gold trusts are structured to allow large Wall Street investment firms to act as Authorized Participants to arbitrage against a premium or discount of the SLV or GLD share prices to the underlying net asset value of the Trusts.

Premiums or discounts to the net asset value of the Trusts occur based on normal supply and demand by investors during the course of trading in SLV and GLD shares.  The Authorized Participants routinely reap profits from their arbitrage activities based on the prevailing discounts or premiums .  According to the prospectuses of the GLD and SLV, the Trusts were structured in this manner to allow the price of the GLD and SLV shares to closely correspond to the underlying value of gold and silver bullion.

The Trusts do not directly buy or sell bullion based on investor buy or sell orders for the SLV and GLD.  The Trusts are not structured like a typical mutual fund which liquidates its holdings if there is a surge of investor redemptions.  Changes in the number of Trust shares outstanding and changes in holdings of gold and silver occur only based on the creation or redemption of shares through Authorized Participants.

Premiums or discounts of the SLV and GLD shares to net asset values are normally less than 1% but can expand dramatically when trading is volatile.  For example, on May 2nd, when silver prices were plunging, the shares of the SLV reached a huge discount of 9.87% from the net asset value of silver held by the SLV Trust.  Investors desperately seeking to liquidate their SLV shares caused the value of the SLV to trade at a steep discount to the underlying net asset value of the Trust.

At this point the lucky Wall Street pros who act as Authorized Participants were gladly buying the SLV shares and simultaneously shorting silver bullion, locking in huge profits.  Authorized Participants who arbitraged during this volatile trading profited greatly at the expense of panicky SLV sellers who sold shares of the SLV at $42.79 that were worth $47.51 based on the net asset value of the SLV.  (Pricing data on the SLV share discount was obtained from the iShares Silver Trust web site).

The Authorized Participants who bought SLV shares during the panic sell off then delivered their SLV shares to the iShare Trust and requested that they be redeemed for silver bullion which was then used to close out short positions in silver bullion.  Under this situation, the silver bullion holdings of the SLV decreased since they delivered silver bullion to the Authorized Participants in exchange for redeemed SLV shares.  This is exactly the situation that has occurred during the May silver sell off and it is therefore no surprise that the holdings of the SLV have plunged.

The average investor in the iShares Silver Trust would be hard pressed to understand the “creation and redemption” features of the SLV shares.  Although the SLV can be an easy way for an investor to participate in silver bullion ownership, my investment thesis is to avoid investments that cannot be fully or easily understood.

For investors seeking to establish investments in gold and silver without having to hold the physical metal, the Sprott Physical Gold Trust (PHYS) or the Sprott Physical Silver Trust (PSLV) offer better opportunities.  Both of these Trust hold specific amounts of physical gold or silver which do not change.  Each share holder has an unallocated interest in the precious metals held by the Trust.

All precious metal holdings of the Sprott Trusts are secured not by a bank, as with the GLD, but by the Royal Canadian Mint of the Canadian Government which is responsible for any loss or damage .  The gold or silver backing the Sprott Trusts are specifically allocated by the Mint to the Sprott Trusts.

From a total investment return standpoint, it is also important to note that the shareholders of the PHYS and PSLV are taxed at the capital gains rate of 15% (if held for more than one year) whereas shareholders of the GLD and SLV are taxed at 28%.  For further information see Sprott Physical Gold Trust Advantages Over SPDR Gold Shares Trust.

GLD and SLV Holdings (metric tonnes)

May 25-2011 Weekly Change YTD Change
GLD 1,214.08 +22.74 -66.64
SLV 9,941.33 -505.10 -980.24

Holdings of the SPDR Gold Shares Trust (GLD) increased by a modest 22.74 tonnes from the prior week to 1,241.08 tonnes.   The GLD held 1,280.72 tonnes at the beginning of the year.  The all time record holdings were reached on June 29, 2010 at 1,320.47 tonnes.  The GLD currently holds 39.0 million ounces of gold bullion valued at $59.6 billion.

Gold And Silver ETFs Show Modest Decline In Holdings

The holdings of the iShares Silver Trust (SLV) declined slightly on the week by 53.10 tonnes as silver prices continued to consolidate after the sharp sell off of early May.

Since the beginning of the year, holdings have declined by 434.19 tonnes to the current level of 10,540.48 tonnes.  The all time record holdings of the SLV were 11,390.06 tonnes on April 25th, as the price of silver was approaching the $50 per ounce level.

Even after the early May pullback, silver has rewarded investors with a gain of 29.7% from the January low of $26.68.  The SLV has delivered a total return of 115.4% over the past year, and an average 25.8% yearly return since its inception in April 2006.

Despite the downturn in ETF holdings, there is strong evidence of continued strong fundamental demand for silver:

  • The U.S. Mint continues to ration sales of silver bullion coins, as total production cannot meet full market demand. This has led to higher premiums for American Silver Eagles and the newly introduced America the Beautiful Silver Bullion coins.
  • Dealers are reporting continued high demand for silver bullion as an increased number of new investors seek to protect their wealth by diversifying out of paper currency and existing investors use the reduced prices to increase holdings.
  • Investor demand for physical gold and silver is growing dramatically in countries such as India.  According to the Financial Times, silver traders in India report that “People are booking incredible amounts of Silver as they see the current drop in prices as a great opportunity to buy more…most are buying for pure investment.”

Meanwhile, the cheap money policies of the Federal Reserve are not likely to change any time soon.  Minutes of the last Fed meeting on April 27-28th, indicate that the Fed extensively discussed an exit strategy from its easy money policies but provided no guidance on timing.  Most analysts have concluded that it may be years before the Fed actually starts to tighten monetary policy.

GLD and SLV Holdings (metric tonnes)

May 18-2011 Weekly Change YTD Change
GLD 1,191.34 -9.70 -89.38
SLV 10,540.48 -53.10 -434.19

Holdings in the SPDR Gold Shares Trust (GLD) declined slightly on the week by 9.7 tonnes.  It was disclosed this week that investor George Soros sold 4.7 million shares of the GLD during the first quarter, bringing his holdings down to a token 49,400 shares.  The liquidated shares were valued at $684 million based on today’s closing price of the GLD.  The 4.7 million shares of GLD represented only approximately 15 tonnes of gold or 1.2% of total GLD holdings.

Was Soros turning negative on gold, as suggested by the media, or was Soros simply taking some short term profits?  While Soros was selling, legendary hedge fund manager John Paulson did not reduce his massive stake of $4.4 billion in the GLD.  Although Soros has a great long term track record, during the financial panic of 2007-2008, he bought Countrywide and Lehman Brothers shortly before they collapsed.  Perhaps history will repeat and the sale of gold by Soros will mark a major bottom in the gold market.

The long term uptrend in gold is still intact and supported by the fundamentals (see Insights From A Legendary Gold Investor).   Since the SPDR Gold Shares inception date of November 12, 2004, the fund has had a spectacular annual average return of 19.6%.  The GLD currently holds 38.3 million ounces of gold valued at $57.3 billion.



Silver And Gold ETFs Stable – Bank Savings vs. Precious Metals and How Much Is a Trillion?

As the silver market stabilized after last week’s sell off, holdings of the iShares Silver Trust (SLV) increased by 153.22 tonnes over the past week.

Since the beginning of the year, the SLV holdings have declined by 381.09 tonnes, but the largest decrease in holdings tracks the silver sell off that began in late April.  From a record high holding of 11,390.06 tonnes of silver on April 25th, the SLV has seen a decline in holdings of 849.58 tonnes.   The reduction of holdings since April 25th exceeds the amount of silver originally held by the SLV at its inception in April 2006 when it held 653.17 tonnes.

One indication of the amount of forced selling that occurred last week is reflected by the premium/discount on the SLV compared to its net asset value.  On April 25th, when the SLV had peak holdings and silver was surging towards the $50 level, the premium on SLV shares was 1.48%.  Investors at that point were paying $45.83 per share while the SLV’s net silver assets were $45.14.  Two days later and trading at very high volume, investors paid $47 per share for the SLV which held silver worth $44.20, a fat premium of 6.29%.

The first week of May saw a steep price decline in silver caused, in large part, by five margin increases by the COMEX on silver futures trading (see How The Comex Crashed The Silver Market).  Forced selling of the SLV resulted in huge discounts from net asset value.  On May 2nd, the discount on the SLV reached a huge 9.87% and sellers of the SLV were receiving only $42.79  for shares with a net asset value of silver worth $47.51.  On Monday and Tuesday of this week, pricing became orderly with only a minor difference between net asset value and market value of the SLV.

The SLV currently holds 338.9 million ounces of silver valued at $13.3 billion.  Despite the recent sell off, silver has had a spectacular performance this year.   From its January low of $26.68 to its closing New York spot price on May 11th of $35.27, silver has risen by 32%, proving the case for diversification into precious metals.

By contrast, savers of paper currency in banks have been treated to returns of virtually zero, courtesy of Ben Bernanke’s zero interest rate policies.  As the public wakes up to the fact that their paper currency savings are becoming worth less and less, the demand for both gold and silver should increase exponentially.

GLD and SLV Holdings (metric tonnes)

May 11-2011 Weekly Change YTD Change
GLD 1,201.04 -18.90 -79.68
SLV 10,540.48 +153.22 -381.09

Holdings of gold by the SPDR Gold Shares Trust (GLD) declined by 18.90 tonnes on the week.  The GDL currently holds 38.6 million ounces of gold valued at $58.2 billion.

How Much Is A Trillion?

Sometimes a very routine event can open your eyes and keep you on the right long term track.  Last week I was having breakfast in Mexico and casually put a tip of a couple of U.S. dollars on the table.  (Yes, they still take our paper money in Mexico).   Gazing at the paper dollars I reflected on how, as a child, two hours of working odd jobs for neighbors would earn me two dollars.

Then, I tried to figure out how big the table would have to be to hold the $2 trillion dollars printed out of thin air by the Federal Reserve over the past couple of years.   At this point, my wife started getting annoyed with me, so I gladly restrained myself from an academic exercise that was fruitless anyways.   How many people can comprehend a trillion dollars?  Not me, but I know it’s a crazy large amount.  I also know that anything that can be produced in the trillions at virtually no cost cannot have any real long term fundamental value.  And that’s all I really need to know to make me indifferent to a short term sell off in the gold and silver markets.

Silver ETF Holdings Plunge As Market Selloff Continues, Gold ETF Holdings Show Small Decline

The amount of silver held by the iShares Silver Trust (SLV) plunged over the past week as the silver market experienced a major sell off.

Holdings of the SLV declined by 665.94 tonnes on the week.  To appreciate the magnitude of this decline, consider that the total silver  holdings of the SLV at its inception in April 2006 was 653.17 tonnes.  In addition to this week’s reduction in silver holdings, the SLV saw a drop of 130.49 tonnes in the prior week.

Holdings of the SLV had recently hit a record high of 11,390.06 tonnes on Monday April 25 as prices soared towards all time highs near $50 per ounce.  Silver held by the SLV Trust has declined by 1,002.8 tonnes or 8.8% from the record high, bringing holdings back to the levels reached on February 10th of this year.

The SLV currently holds a total of 334 million ounces of silver valued at $13.5 billion.  After recently reaching a high of $48.35 the SLV sold off sharply, closing yesterday at $38.27.  The SLV has declined by 21% from its all time high reached five trading days ago on April 28th.

GLD and SLV Holdings (metric tonnes)

May 4-2011 Weekly Change YTD Change
GLD 1,219.94 -9.70 -60.78
SLV 10,387.26 -665.94 -534.31

A multitude of factors, both fundamental and technical were cited for the sharp decline in silver prices including:

  • Five margin increases on silver futures contracts, including two new ones announced on May 4th by the COMEX.
  • Liquidation of silver holdings by a hedge fund run by George Soros.
  • Excessive speculation in silver as indicated by huge volume in SLV trading.
  • Manipulation of the gold and silver markets by large players with short positions..
  • A very overbought market described by some as a “religious fervor” for silver.
  • Profit taking at the technically significant level of $50 per ounce, last reached in 1980.
  • The end of QE2 announced by the Fed last week.
  • Huge record volume in silver futures trading.

In any event, silver has become significantly cheaper in the past week and the fundamental reasons for owning precious metals remain intact (see Why There Is No Upside Limit For Gold and Silver Prices).  Long term investors should welcome the shakeout of day traders and speculators from the silver market and view this as a buying opportunity.

Holdings of gold by the SPDR Gold Shares Trust (GLD) declined modestly by 9.7 tonnes.  Current gold holdings of the GLD amount to 39.2 million ounces valued at $60.4 billion.

The inability of politicians to seriously address the budget deficit and ballooning national debt provide a compelling reason to diversity out of the U.S. dollar and into precious metals.   The dollar is close to all time lows as numerous countries announce their intention to diversify out of dollars to protect their wealth.  The disclosure that Mexico had significantly increased its gold reserves this year highlights the flight from paper currencies.  Based on the fundamentals, long term investors should view a correction in precious metal prices as an opportunity to add to positions.

Silver and Gold ETF Holdings Decline Amidst Volatile Trading

In a week of volatile precious metals trading, holdings of both the iShares Silver Trust (SLV) and the SPDR Gold Shares Trust (GLD) saw modest declines.

The holdings of the SLV declined by 130.49 tonnes or 1.2% from last week to 11,053.20 tonnes.  Looking at the daily changes, however, provides a a better indication of the volatility in SLV holdings during the week.

The holdings of the SLV hit an all time record high amount of 11,390.06 tonnes on Monday April 25th.  The substantial decline of 336.86 tonnes over the following two days mirrors the volatile price action of the SLV, which declined more than $2 on Tuesday before recovering to all time  highs at Wednesday’s closing price.

SLV - COURTESY YAHOO FINANCE

The SLV currently holds 355.4 million ounces of silver valued at $16.1 billion.  The SLV is currently the largest silver ETF and has seen tremendous growth in holdings since the Trust’s inception in April 2006, when it held a mere 653.17 tonnes valued at $263.5 million.  According to the Silver Institute, at the end of the first quarter 2011, total holdings held by all silver ETFs was 612 million ounces.

Despite the tremendous appreciation of the SLV, the silver market remains a relatively small market which leads to speculation that silver prices are being manipulated.  Volatility in silver trading over the past week was enhanced by rumors of massive short positions by traders, attempts to corner the market by larger players, and the inability to deliver physical silver on futures contracts.

The recent volatility in silver is likely to continue as additional players are drawn into one of the hottest markets of 2011 and wide price swings may become the norm over the short term.

For long term  investors, the fundamentals of the silver market should overweight any short term volatility.  Sales of Silver Eagles by the US Mint in the first quarter of 2011 was 37% higher than the previous year reflecting continuing investor demand.

GLD and SLV Holdings (metric tonnes)

April27-2011 Weekly Change YTD Change
GLD 1,229.64 -0.61 -51.08
SLV 11,053.20 -130.49 +131.63

Gold holdings in the GLD declined modestly by 0.61 tonnes after an increase of 17.29 tonnes for the previous week.  The current holdings of the GLD amount to 39.5 million ounces of gold valued at $59.7 billion.

Gold hit another all time high today, recently trading at $1,531.  The Federal Reserve ignited a sharp rally in gold and silver after releasing details of this week’s FOMC meeting. The precious metal markets moved higher after the Federal Reserve said it would continue super aggressive monetary policies despite the June wind down of QE2.  The Fed indicated that it would not reduce the size of its balance sheet and would leave short term interest rates at zero.

The Fed also left the door open to future unconventional policy moves if deemed necessary.  Since the Fed cannot move rates below zero, any additional “unconventional easing” would almost certainly mean additional money printing by the Fed.   The US dollar traded lower on Fed comments and is now threatening to break to new all time lows.



iShares Silver Trust and SPDR Gold Trust Holdings Increase As Worries Over Paper Money Grow

Both the iShares Silver Trust (SLV) and the SPDR Gold Shares Trust (GLD) saw holdings jump on the week as precious metal prices continued to climb.

The holding of the SLV increased by a substantial 213.98 tonnes over the past week after posting a decline of 192.74 tonnes in the previous week.  The all time record holdings of the SLV was reached on April 11, 2011, at 11,242.89 tonnes.

Strong investment and fundamental demand for silver continued to push silver prices higher with the London PM Fix Price for silver closing yesterday at $44.79, up from $40.22 a week ago.

While some analysts worry about the “inflation” in silver prices, the world’s most successful investor is worried about dollar inflation.  Warren Buffet – “We’re following policies that will lead to a lot of inflation down the road unless changes are made”.  The U.S. can’t “run the kind of deficits we’re running and other policies…without it being enormously inflationary”.

The SLV currently holds 359.6 million ounces of silver bullion valued at $16.1 billion.  The SLV has seen seen an astonishing increase in the value of its holdings.  At the Trust’s inception in April 2006, silver holdings of 653.17 tonnes were valued at $263.5 million.

GLD and SLV Holdings (metric tonnes)

20-April-2011 Weekly Change YTD Change
GLD 1,230.25 +17.29 -50.47
SLV 11,183.69 +213.98 +262.12

Gold holdings of the SPDR Gold Shares Trust increased on the week by 17.29 tonnes to a total of 1,230.25 tonnes, after an increase of 7.49 tonnes in the previous week.  The GLD now holds a total of 39.6 million ounces of gold valued at $59.4 billion.

Gold continued to gain this past week and, as measured by the London PM Fix Price, closed yesterday at an all time high of $1,501.00.  Gold has gained $43.50 over the past week and since the beginning of the month is up $83 per ounce or 5.8%.

The price gains in gold continue to confound the numerous skeptics of the golden metal who can’t understand why gold is going up in the absence of high rates of inflation.  Perhaps the skeptics should pay attention to the increasingly vocal concerns by governments holding large reserves of U.S. dollars and whose economies are being harmed by the flood of rapidly depreciating U.S. dollars.

COLLAPSING US DOLLAR - COURTESY STOCKCHARTS.COM

Nyet to diplomacy. In extremely blunt remarks, Russian Prime Minister Vladimir Putin, commenting after the S&P downgrade on the U.S. debt outlook, said:  “Look at their (the U.S.) trade balance, their debt and budget.  They turn on the printing presses and flood the entire dollar zone – in other words, the whole world, with government bonds.  There is no way we will act this way anytime soon.  We don’t have the luxury of such hooliganism”.   Nor is Mr. Putin simply talking tough – the Russian government is also acting to protect its financial interests by reducing their holdings of U.S. treasury debt.  Russia, the world’s third largest holder of U.S. debt has been greatly reducing its dollar holdings this year.

China, the world’s largest holder of U.S. dollars totaling a massive $3 trillion, has been expressing its frustrations and concerns with U.S. monetary policy for years.  A plunging US dollar reduces the value of US debt held by China.  To offset the losses from holdings US paper assets, China has been reducing its holdings of U.S. dollars and buying physical assets worldwide.  China also took major steps this week to gradually implement full convertibility of the yuan in world markets which would allow it to hold fewer US dollars.

Governments worldwide are taking major steps to reduce loss exposure from holding US dollars that can be printed in the trillions by the U.S. Federal Reserve.  In another sign of disgust towards U.S. fiscal and monetary policies,  Brazil, Russia, India, China, and South Africa recently agreed to use their own currencies among themselves instead of the U.S. dollar.

The result of ultra loose U.S. monetary policies, huge budget deficits and money printing by the Federal Reserve have all contributed to the flight to wealth preservation as reflected by a collapsing US dollar and skyrocketing precious metals prices.

iShares Silver Trust Holdings Decline

The iShares Silver Trust (SLV) saw silver holdings slump on the week while holdings of the SPDR Gold Shares Trust (GLD) increased.

SLV holdings dropped by 192.74 tonnes on the week after adding 22.93 tonnes in the previous week.  Total holdings of the SLV amount to 10,969.71 tonnes or 352.7 million ounces of silver valued at $14.2 billion.  There is not always a direct correlation between the movement in silver prices and the amount of silver held by the trust.  For example, the total silver holdings of the SLV have increased by only .4% since the start of the year, while silver prices have increased by 32% over the same period.

There is a direct correlation between the price of the SLV and the price of silver.  The iShares Silver Trust was structured to track the price movement in silver bullion and it has achieved that result.  Since the inception of the SLV in April 2006, the annualized total return of the SLV has been 25.17% compared to an annualized total return for silver of 25.79%, the difference being primarily attributable to sponsor fees of .5% a year.

GLD and SLV Holdings (metric tonnes)

13-April-2011 Weekly Change YTD Change
GLD 1,212.96 +7.49 -67.76
SLV 10,969.71 -192.74 +48.14

The SLV has experienced a huge long term increase in silver holdings based on investor demand.  Since the inception of the trust in April 2006, total holdings of the SLV have exploded by almost 1,600% from 653.17 tonnes to the current total of 10,969.71 tonnes.

Silver experienced price volatility during the past week but ended up $.59 per ounce at Wednesday’s close from the prior week.  Earlier in the week, silver saw a brief pullback from its highs as investors took profits in the commodity sector.  In addition, the silver market was spooked by word of an investor taking a large bearish options position in the May SLV put contracts.

SLV - COURTESY YAHOO FINANCE

Holdings of the GLD increased by 7.49 tonnes on the week.  The GLD currently holds 1,212.96 tonnes or 39.0 million ounces of gold valued at $56.8 billion.  As measured by the London PM Fix Price, gold declined by a modest $4 per ounce from its April 6th closing price.

GFMS,  a prestigious metals consulting firm based in London,  issued a bullish forecast for gold prices during 2011.  Barring a major rise in interest rates or a strong rally in the US dollar, GFMS is predicting that gold will reach $1,600 per ounce by the end of the year.  GFMS based its bullish forecast on very easy monetary policies, surging rates of inflation in Asian economies and continuing investment demand for gold.