Investors are ‘Scooping’ Up Gold in Record Amounts


It looks to me like it does not matter in here whether global stocks are rising or falling investors keep scooping up gold.

Holdings in gold-backed ETFs rose by 55 tonnes in the last 3 days accounting for almost 33% of YTD in the last 3 days.

As a safe-haven asset, demand for the precious Yellow metal tends to move in the opposite direction from stock markets. Yet this week’s ETF buying continued Tuesday even as equities bounced following Monday’s deep dive.

Gold continues to provide a safety net as financial markets fall. Investors feel comfortable owning gold in this scenario.

Prices swung between gains and losses Wednesday as markets awaited details on the timing and size of government stimulus in response to the coronavirus.

US stocks sank as much as 5.1%, putting pressure on investors to cash in gains from bullion to cover margin calls.

There have been a lot of reports of a re-run of the pre-financial crisis frame in the gold market, where a lot of investors were having to sell their more-liquid assets to meet losses on their less-liquid assets. Gold falls into the category of more liquid.

An emergency interest rate cut by the Bank of England added support to bullion, while Italy plans to spend $28.3-B on measures to help combat the economic effects of the outbreak.

Given the uncertain nature concerning the coronavirus, low global interest rates, central banks expected to provide lots more liquidity and a high level of negative yielding debt globally, there is strong price support for precious metals.

Gold holdings in ETFs rose 170.5 tonnes this year through Tuesday, the latest data show. Buying is being driven by recession fears because of the coronavirus outbreak and a growing wave of crisis monetary easing.

Investors’ focus now turns to the ECB and its policy meeting Thursday, with President Christine Lagarde warning of an economic shock unless leaders act urgently. The Fed meets next week and is also seen paring rates, further aiding gold’s appeal.

Stay tuned…