Savvy Investors Moving Back to Gold

Savvy Investors Moving Back to Gold


Gold prices climb as those savvy investors uncertain about global growth outlook hedge their portfolios.

Gold prices have surged 14% since September, when in this column I signaled a buy signal for the precious Yellow metal, just as the major US stock market indexes were making record Tops.

Gold-focused ETFs saw about 72 tonnes of inflows last month, exceeding their total for all of Y 2018, according to the World Gold Council (WGC).

Because of the global political and economic uncertainty and few safe-havens, the precious Yellow metal has become a strong choice for managed money seeking to hedge their portfolios.

A stock-market decline late last year has helped gold, though this year’s gold rally has taken place alongside a sharp move North in the major US indexes YTD:

  • Russell 2000 +17.9% YTD
  • NAS Comp+13.5% YTD
  • DJIA +11.6% YTD
  • S&P 500 +11.4% YTD

The $11-M VanEck Vectors Gold Miners ETF, ticker GDX, saw trading volume spike to its highest in 2 months Tuesday as we reported.

About 90-M shares worth over $2-B exchanged hands, 2X the fund’s usual volume and more than any other US ETF that day. GDX is the largest materials ETF and tracks corporations that are primarily involved in mining gold and silver.

In addition, we recently reported that China is adding to its gold reserves again, boosting holdings for a second month and reinforcing an outlook from Bulls including Goldman Sachs Group Inc. that central-bank buying will likely remain strong this year.

The People’s Bank of China raised holdings to 59.94 million ounces, or about 1,864 tonnes, by the end of January from 59.56-M oz a month earlier, according to data on the bank’s website. In tonnage terms, it added about 11.8 toness last month after taking in just under 10 tonnes in December, which was the 1st time the PBOC had boosted its hoard since October 2016.

China, the Top Gold producer and consumer, is adding to holdings on signs of slowing growth,

Central banks worldwide added the 2nd-highest annual total on record in 2018 as heightened geopolitical and economic uncertainty drove them to diversify reserves, according to the WGC.

While China’s holdings are the 6th largest by country, they account for only 2.4% of reserves, compared with more than 70% in Germany and the US, WGC data show.

Gold rose for a 4th month running in January, topping $1,300 oz, as the Fed signaled it was done raising interest rates for a while, pivoting away from its bias toward tighter policy.

Retail investors and funds have also been adding to holdings in gold ETFs, lifting the worldwide total to the highest since Y 2013. Last month, ETF holdings increased 70.6 tonnes, the most since February 2017.

Have a terrific weekend.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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