Gold Rush Creating Issues For Gold Buyers

GLD - 10Q

Some interesting things to think about when owning paper gold GLD - from prospectus

There is an article in the WSJ this morning that talks about HSBC returning gold to retail clients as its’ vaults are becoming overloaded with the yellow metal.  There’s a similar article here  The articles suggest that it needs to make room for its’ institutional clients.  See below :

“HSBC has told retail clients to remove their small holdings from its fortress beneath its tower on New York City’s Fifth Avenue. The bank has decided retail customers aren’t profitable enough and is demanding those clients remove their gold to make room for more lucrative institutional customers.“

I would be willing to wager that the institutional clients that the article refers to is the GLD services that it provides for its’ clients.  GLD, it seems custodies with HSBC.  It must be a profitable deal for HSBC to custody the GLD holdings.  With the surge in Gold price and the move to owning gold accelerating, it would seem that HSBC doesn’t want to lose this business.

Supply and Demand of Gold 1998-2007

It’s worth noting that a small component of deman from 1998 to 2007 was retail demand.  I would assume that retail demand has become a much larger demand component over the past several years.  In 2007 there was already a deficit of supply/demand, based on a retail demand of 402 tonnes.  With increasing retail demand - I would be expecting that the imbalance would be growing larger.

Change in ounces from 2008-2009

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