When Stockpiling Gold Becomes Hoarding Gold (STT, GLD)

An affiliate of State Street Corporation (NYSE: STT) reported this morning that its ETF SPDR Gold Trust (NYSE: GLD) has amassed more than $30 billion in assets. That makes the trust second only to State Street’s S&P 500 ETF in asset size.

In the announcement, made in conjunction with a subsidiary of the World Gold Council, State Street noted that the fund has grown by more than 60% in the last six months. The fund owns nearly 1,029 tons of gold, a total that grew by 220 tons in just the last month.

The run-up in gold prices, which topped $1,000/ounce briefly today, signals investors’ wariness about the equity markets. Call it speculation on fear, as we did recently. Inflation worries always fuel gold prices. But there is virtually no inflation today, and little if any in sight.

Today’s investors seem to be afraid of fear itself. There is no appetite for risk. None. Zero. Nada. In such an environment, only gold lets you sleep at night.

SPDR Gold Trust dropped below $96/share this morning, but has recovered somewhat to about $97.68. Stocks opened a bit higher this morning, and crude prices were up. Thus, gold went down. As the morning goes on, stock prices are softening. Gold goes up.

It’s almost as though investors fear that the next minute is the last one.

Paul Ausick
February 23, 2009