Publications
Partners
Beijing - Global gold holdings topped 2,000 metric tons for the first time since July 2013 as the fallout from the UK’s vote to quit the European Union fuses with rising speculation that US rates won’t rise any time soon to fire up a hunt for haven assets.
Prices continued their ascent as miners rallied.
Holdings in bullion-backed exchange-traded funds rose 4.1 tons to 2 001.4 tons on Wednesday, according to data compiled by Bloomberg. That’s larger than the gold reserves held by China, the world’s top consumer and a consistent central-bank buyer in recent months.
The latest ETF uptick followed an influx of 38.1 tons on Tuesday, the most in tonnage terms in a single day since 2009.
Worldwide assets in the funds have surged 37% this year, rising with prices, as a constellation of factors including slowing growth, negative rates in Europe and Japan and the likelihood that the Federal Reserve won’t hike further have combined to spur demand.
The UK’s vote last month to quit the European Union has added further impetus to that pro-bullion mix. Gold has likely entered the early stages of the next bull run, according to UBS, while ABN Amro says prices may hit $1 425 this quarter.
“The core driver for gold demand at the moment is an increasing conviction that US interest rates will be put on hold, especially post the Brexit vote,” Long Ling, chief analyst for precious metals at Industrial Futures, said by phone from Shanghai.
Investors have also been flocking to bullion to avoid political uncertainty and market volatility, according to Long.
Bullion’s surge
Gold for immediate delivery traded 0.3% higher at $1 367.45 an ounce at 08:37, gaining for a seventh day, according to Bloomberg generic pricing. It rallied to $1 375.28 on Wednesday, the highest since March 2014, and prices are up 29% in 2016. Among miners, Zijin Mining surged in Hong Kong, while Australia’s Newcrest Mining rose in Sydney.
The ETF holdings compare with the 1 808.3 tons held by China, according to figures from the World Gold Council as of last month. They’re also about twice the size of Switzerland’s holdings, which were 1 040 tons, and about a quarter of the stash kept by the US, according to the data.
In the US, the Fed is losing confidence in its need to tighten any time soon as officials face rising uncertainty about the outlook for growth at home and abroad, according to minutes released Wednesday of a meeting held before Britain’s vote.
In Europe, there’s speculation policy makers may add to stimulus, as well as rising concern about weakness in Italy’s banking industry.
Global holdings
Global bullion holdings in ETFs surged 21% in the first three months of the year and followed that with an 11% gain between April and June, according to data compiled by Bloomberg. That result was the first back-to-back quarterly rise in assets since 2012.
“The ETF trend started in the March quarter with nearly 300 tons going into the sector,” said David Lennox, a resource analyst at Fat Prophets in Sydney. “The emergence of central banks collectively being more inclined to possibly deepen QE programs, including the Fed neutrality stand, have been a very good tailwind for gold,” he said, referring to quantitative easing by its initials.
UBS has raised its short-term target to $1 400 an ounce from $1 250, according to a July 5 note. Singapore-based Oversea-Chinese Banking Corp. has flagged the potential for bullion rising to $1 400, while Goldman Sachs Group boosted its three-, six- and 12-month targets. In a July 6 note, ABN Amro’s Georgette Boele raised her end-of-quarter forecast by $75 to $1 425.
“We’ve seen ETF gold holdings growing significantly since the start of this year,” said Gavin Wendt, director and senior resource analyst at MineLife Pty in Sydney.
Upside elements are strong, driven by uncertain outcomes from the experiment of zero or negative rates, the postponement of any US rate rise and growing retail investor demand, according to Wendt.
