Interesting story on the gold market from the FT.
Investors are finally starting to come onboard.
Gold hits record high as investors seek havens
Gold prices hit a nominal record high above $1,260 a troy ounce on Friday, boosted by investors buying bullion-backed exchange-traded funds.
Holdings at the New York-listed SPDR Gold Trust, the largest gold ETF, surged this week to a record high of 42.05m ounces, up more than 7 per cent over the past month.
Holdings of other large gold ETFs have also surged.
However, Edel Tully, precious metal strategist at UBS in London, said support for the gold rally was “quite narrow,” noting that “physical safe haven buying was lagging well behind that of May”.
In London, spot gold surged to an intraday high of $1,260.20 an ounce, up 3.6 per cent on the month. Adjusted for inflation, however, gold is still a long way from its record high above $2,300 an ounce in 1980.
Traders and bankers said hedge funds remain extremely bullish on gold because they believe that, sooner or later, the central bank’s recent massive monetary expansion would translate into inflation.
Bankers said that some hedge funds have internal forecasts above $1,300-$1,500 for the end of the year.
But with demand for jewellery, the traditional backbone of the bullion market, declining, some consultants are cautioning that gold might lack the strength to sustain the recent move above $1,250 an ounce for a long time.
Investors last year bought more gold than buyers of jewellery for the first time in three decades, according to GFMS, the London-based precious metal consultancy.
Investors are finally starting to come onboard.
