Gold & Silver RIP Higher As BlackRock Smells Shortage of “Pet Rocks”

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On an interesting note, it was reported today that is suspending issuance of new shares in its physical gold ETF (ticker: IAU) due to a shortage of registered shares: LINK.  This is highly misleading because market makers can borrow shares and short them to buyers. Currently there’s only 2.4 million shares short in IAU out of 635 million shares issued. That’s only .3% of the float, which means there’s 10’s of millions of shares available to borrow and short in order to satiate buyer demand.  Compare this to GLD, which has 4.5% of the float shorted right now.

The real reason Blackrock had to suspend issuance of shares is because it is seeing something in the physical market that is stopping the firm from creating new share “baskets” which require the procurement of physical gold to back those “baskets.”  The best bet is that Blackrock knows it will ultimately be unable to buy enough physical gold on a timely basis to back the registration of new shares if called upon to do so.   In other words, there is a shortage of Pet Rocks.

Gold and silver are moving higher because all signs indicate that the markets are broken and the Government is beginning to lose control over the system.   The flow of capital out of paper assets and in to physical gold and silver is further evidence that the Government, Wall Street and the financial markets are both quickly losing credibility.