Incredible Gold Demand Overwhelms IAU Gold Trust, Forced to Cease Share Creation by Nathan McDonald, Sprott Money
The demand for gold remains intense. This year has seen incredible strength in the physical precious metals markets as gold, though not rocketing higher, has stood stout in the face of crashing commodities markets.
This strength has once again shown the world that gold is no mere metal. It is an insurance policy against political collapse, chaos and turmoil. In addition, it is true and real money – money that has stood the tests of time and weathered the many storms that have plagued mankind.
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The latest indication of gold’s incredible, continued strength comes from Blackrock ETF, who issues the IAU (Gold Trust). Blackrock is stating something truly staggering that cannot be ignored. They are stating that they have seen no net outflow of funds so far in 2016, not even for one day! This means that each and every day so far this year, the IAU has seen a constant pouring of money into the fund.
Due to this fact, and the incredible gold demand they are seeing, they have had to actually suspend the issuance of further gold trust shares and had the following to say in a recent press release:
Issuance of New IAU (Gold Trust) Shares Temporarily Suspended; Existing Shares to Trade Normally for Retail and Institutional Investors on NYSE Arca and Other Venues.
The suspension results from surging demand for gold, which requires registration of new shares.
iShares Delaware Trust Sponsor LLC, in its capacity as the sponsor of iShares Gold Trust (IAU), has temporarily suspended the creation of new shares of IAU until additional shares are registered with the Securities and Exchange Commission (SEC).
This suspension does not affect the ability of retail and institutional investors to trade on stock exchanges. Retail and institutional investors will continue to be able to buy and sell shares in IAU.
IAU holds gold as a physical asset. IAU is an exchange-traded commodity (ETC), which therefore is not eligible for registration as an investment company under the ’40 Act. IAU may only be registered under the ’33 Act as a grantor trust. Under the ’33 Act, subscriptions for new shares in excess of those registered requires additional filings with the SEC.
Nearly all other U.S. iShares are exchange-traded funds (ETFs), registered as investment companies under the ’40 Act. The ’40 Act provides for the continuous offering of shares and does not require registration of additional shares as the fund grows due to investor demand in connection to new subscriptions.
Since the start of 2016, in response to global macroeconomic conditions, demand for gold and for IAU has surged among global investors. IAU has $8 billion in assets under management, and has expanded $1.4 billion year to date. 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. The ability of authorized participants to redeem shares of IAU is not affected.
What is ironic or perhaps not at all, is that this announcement from Blackrock comes on the heels recent news stating that Canada has now officially sold ALL of their gold reserves, that’s right, every single ounce.
If these two stories are connected in any way, it would not be surprising as it has long been suspected that Western Central banks have been artificially keeping the price of gold suppressed through supplying gold to the markets.
This action is absolutely shameful and is a prime example of how many Western Central bankers have sold its citizen’s true wealth, and for what? Additional fiat money that is eventually going to its fair value of zero?
Continue to watch the gold markets in coming months – the geopolitical world isn’t getting anymore stable as we progress in time – it is only a matter of time before the physical gold markets completely overwhelm the paper gold markets.
If this story out of Blackrock is any indication, then we may be closer than we think.