Mining for Money: The Real Fear Index

Do you want to see a picture of fear? Just look at what’s happening in the world’s largest gold ETF.

The SPDR Gold Trust (NYSE: GLD) added 11.84 metric tons of gold on April 19. That’s the most since Sept. 6, 2016. And it brought the GLD’s holding to 860.76 metric tons. That’s 27,674,076 troy ounces.

What’s driving this? Fear.

North Korea is turning up the heat on its nuclear threat. In fact, North Korean state media just warned the United States of a "super-mighty preemptive strike." What does that mean? Who the heck knows! We do know that the U.S. is now calling North Korea an "imminent threat."

And you can bet people are hedging nuclear fears with gold.

Related story: When U.S. Stocks are Expensive, and Volatile

Meanwhile, the Trump administration may walk away from the nuclear deal with Iran. Secretary of State Rex Tillerson said Wednesday that Iran, if left "unchecked," could follow North Korea’s path to becoming a nuclear rogue nation.

"The evidence is clear. Iran’s provocative actions threaten the U.S., the region and the world." Tillerson said.

Another nuclear threat? Maybe. And maybe time for more gold.

Related story: A Slow March to Nuclear War

Then take the French election. (Please!) The two leading contenders are, on the right, someone who wants to take France out of the euro and NATO. And, on the left, a good ol’ fashioned left-wing socialist.

Yeah, that’s gonna make investors nervous either way.

These are the known problems. But you can bet your bottom krugerrand that the market is starting to worry about black swans, too. The events you can’t predict.

You know who else is buying gold? Russia. Slowly, steadily, the Russians add to their Smaug-worthy hoard o’ gold every month. Russia’s gold holdings just hit 54 million troy ounces. That’s up 800,000 troy ounces in one month.

But it’s the tip of an iceberg that has been rising for years. Here is a chart of official Russian gold holdings since 2011.

Russia has its own fears, its own problems. One is the fear of U.S. sanctions, which bite even harder because the U.S. dollar is the world’s reserve currency.

I believe Russia has long-term plans to change that. That’s a goal shared by some of our other "frenemies," including China and Saudi Arabia. They all chafe under the mighty U.S. dollar as the world’s reserve currency.

That’s one reason why the world’s central banks keep buying gold. To diversify away from greenbacks.

And ALL the world’s leaders share one fear in common: That the global financial system could come crashing down like a wobbly Jenga tower.

And gold is a great way to insure against currency and financial unrest, too.

So why are investors shoving more money into the GLD? Fear. It’s the real Fear Index.

What Lies Ahead

We can’t predict the future. But we already know we are in a bullish cycle for gold. Supply/demand forces are in play that should shift prices into higher gear.

Now, add to that, it sure seems like we are in a cycle of worsening global tensions. Increasing conflicts. And heightening global fears.

The fear index is pointing up — for gold.

All the best,
Sean

Your thoughts on “Mining for Money: The Real Fear Index”

  1. “The SPDR Gold Trust (NYSE: GLD) added 11.84 metric tons of gold on April 19. That’s the most since Sept. 6, 2016. And it brought the GLD’s holding to 860.76 metric tons. That’s 27,674,076 troy ounces.”

    How reliable are GLD’s holding reports? GLD does not give retail investors the right to redeem for any of its mystery physical gold holdings. This fact alone ensures the GLD shares to be nothing more than paper at the end of the day. GLD also has a glaring audit loophole in their prospectus that states they have no right to audit subcustodial gold holdings. To this day, I have not heard of a single good reason for the existence of this backdoor to the fund. Some other red flags I’ve stumbled upon, verified and welcome everyone else to verify for themselves:

    “Did anyone try calling the GLD hotline at 866▪320▪4053 in search of numerical details on GLD’s insurance? The prospectus vaguely states “The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody.” When I asked about how much of the gold was insured, the representative proceeded to act as if he didn’t know and said they were just the “marketing agent” for GLD. What kind of marketing agent would not know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors.”

    “I remember there was a highly publicized visit by CNBC’s Bob Pisani to GLD’s gold vault. This visit was organized by GLD’s management to prove the existence of GLD’s gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on the most recent bar list at that time. It was later discovered that this “GLD” bar was actually owned by ETF Securities.”

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Sean travels far and wide to seek out small-cap values in the natural resource sector. His journey started in New England. As a youth he worked on Mt. Washington, on the cog railroad that runs to the summit. Working on…