BlackRock's Gold ETF (IAU) has seen fund inflows every day in 2016 (no outflows at all) and with the stock trading above its NAV for most of the year, the world's largest asset manager has made a significant decision:
- *BLACKROCK SAYS ISSUANCE OF GOLD TRUST SHARES SUSPENDED
- *BLACKROCK SAYS SUSPENSION DUE TO DEMAND FOR GOLD
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.
Authorized participants and other market makers have a range of existing tools to meet investor demand within normal settlement cycles, including existing holdings of IAU in inventory and use of hedging instruments to cover short positions. We expect that the filing of the 8-K will occur before the close of normal settlement cycles (six business days for registered market makers). This filing would enable resumption of normal creations.
Any forward-looking statements used herein are based on expectations of iShares at this time. Whether or not actual results and developments will conform to expectations and predictions of iShares, however, is subject to a number of risks and uncertainties, including general economic, market and business conditions, changes in laws or regulations or other actions made by governmental authorities or regulatory bodies, and other world economic and political developments. iShares undertakes no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
As with all securities, there may be increases in the spread quoted between offers to buy and sell shares. In addition, there could be a variation between the market price at which shares are traded and the shares' net asset value, which is also the price at which shares can be redeemed by authorized participants. The potential impact of either wider spreads between bid and offer prices, or reduced number of shares on which quotes may be available, could increase trading costs to investors.
It appears the huge demand for physical gold (and lack of supply) is finally catching up with the manipulation of paper prices.
If this is anythingother than a brief technical suspension, it could well unleash panic-buying as we already pointed out – there is no physical gold!!
As we previously concluded, the reality that there are just two tons of gold to satisfy delivery requsts based on accepted protocols should in itself be troubling, ignoring the latent question why so many owners of physical gold are de-warranting their holdings.
Considering there are now less than 74,000 ounces of Registered gold at the Comex, or just over 2 tonnes, we may be about to find out how right, or wrong, the skeptics are, because at this rate the combined Registered vault gold could be depleted as soon as the next delivery request is satisfied. Or isn't.
via Zero Hedge http://ift.tt/1TvtjIF Tyler Durden