GLD Gold ETF Shrinks Again as TLT Rallies Off 16-Year Low, Ackman Quits Bond Short
Tuesday, 10/24/2023 15:30
GOLD fell but government bond prices rose Tuesday, extending the break from their more typical pattern of moving together after bullion-backed ETFs shrank yet again despite longer-term interest rates easing from the highest in 16 years.
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"We
covered our bond short," said high-profile investment manager Bill Ackman of the $18 billion Pershing Square funds last night, after betting against 30-year Treasury debt prices back in August, when they traded 20% above current prices but 40% below the peak of 2020.
"There is too much risk in the world to remain short bonds at current long-term rates [and] the economy is slowing faster than recent data suggests."
Officials in Gaza – where the United Nations says it will
have to suspend operations if more shipments of fuel aren't allowed in – today claimed that Israeli air raids in retaliation for Hamas' atrocities of 7 October have
killed more than 700 people in the last 24 hours, while the US government
accused Iran of "actively facilitating" attacks on its military bases across the Middle East by supporting Hamas and also Hezbollah terrorists in Lebanon.
With both the GLD and IAU gold ETFs shrinking overnight, gold bullion today fell to $1963 per Troy ounce versus a stronger US Dollar, down more than $30 from
Friday's 5-month high near $2000.
The yield on 10-year US Treasury bonds held at 4.86% per annum, last night's 1-week closing low, after
spiking through 5.00% on Monday for the first time since mid-2007 – eve of the global financial crisis.
Tuesday's rebound in government debt prices helped the share price of $10bn exchange-traded fund the TLT – which tracks the value of 20-year and longer-dated US Treasury bonds – rally for a second session running after sliding 10 times in October's prior 15 trading days to hit a run of new mid-2007 lows.
Giant
gold ETF the GLD, in contrast, has now fallen in price for 2 sessions running after closing Friday near to its highest since May.
Month-to-month over the last 10 years, the price of the TLT and the GLD have moved together 65% of the time.
But while the TLT is currently 5.0% lower for October so far, the GLD has risen 6.7% – reflecting the gains in gold bullion – and it now stands over 300% higher since launching in the early 2000s, while the TLT is virtually unchanged.
"Gold has remained friendless [among ETF investors] despite the political turmoil," says bullion-market analyst Rhona O'Connell at brokerage StoneX.
"With only three days of net creations [ie, inflows] since the first [Hamas] attack...the story that the daily numbers tell is of [investors] selling into strength with some of the highest net redemption days coming when the price was running hard."
Monday saw the SPDR Gold Trust (NYSEArca: GLD) shrink by 0.4%, reversing 1/5th of Friday's sudden inflows to edge back towards the smallest size in over 4 years.
World No.2 gold ETF the IAU from iShares also shrank, with shareholders liquidating 0.3% of the trust to reach its smallest since April 2020.
The Dollar meantime jumped 0.5% against the rest of the world's major currencies, led by a rally off 1-month lows versus the Euro after Christine Lagarde – head of the 20-nation European Central Bank – reportedly told Euro-area finance ministers that, while her
battle against inflation is "going well", the 350-million citizen single currency bloc now faces recession.
"Credit standards tightened further, and more than expected, across all loan categories," says
the ECB's latest bank credit report today.
"The demand for loans by firms and households [has] continued to decrease strongly."
Both factory and service-sector activity in the USA are holding firm in October, preliminary PMI survey reports from data agency S&P Global said Tuesday. But the manufacturing recession in Japan and the Eurozone is worsening badly, with services activity across Europe and the UK shrinking as well.
Euro gold today fell as low as €1840 per Troy ounce – down 2.4% from Friday's re-touch of March 2022's Russia-Ukraine invasion record – before rallying €10.
Gold-backed ETF trust funds listed on European bourses have shrunk by more than 1/10th as the metal's price has held at a record year-to-date average so far in 2023.
The
UK gold price in Pounds per ounce meantime rose back to £1610 today, a record high when first reached amid this spring's mini-crisis in US regional banking stocks but 1.5% below last Friday's fresh all-time high at the London PM benchmarking auction.
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