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WSJ: Frightened Investors Flock Back to Gold

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(Dmitry Rukhlenko/Dreamstime)

By    |   Friday, 22 February 2019 03:09 PM

Gold prices have climbed as investors uncertain about global growth outlook hedge their portfolios, The Wall Street Journal reported.

Gold prices have surged 14% since late August, when the Nasdaq Composite Index last hit a fresh record, and stand at their highest level since last April, the Journal reported.

Gold-focused exchange-traded-funds notched nearly 72 tons of inflows last month, exceeding their total for all of 2018, according to the World Gold Council.

Amid global political and economic uncertainty, the precious metal has become a compelling choice for money managers seeking to hedge their portfolios at a time of anxiety over economic growth and trade conflicts between the U.S. and its partners, said George Gero, managing director at RBC Capital Markets.

“Everywhere they look, investors see problems,” Gero told WSJ.com.

A stock-market decline late last year has also helped gold, though this year’s gold rally has taken place alongside a sharp bounce in the S&P 500, which is up more than 11%.

“After the complacency of recent years, investors are realizing they may be overexposed on the equity side and want to build up a hedge,” said Maxwell Gold, director of investment strategy at Aberdeen Standard Investments.

To be sure, there is much more other evidence of investors taking a renewed shine to the precious metal.

The $11 billion VanEck Vectors Gold Miners ETF, ticker GDX, saw trading volume spike to its highest in two months Tuesday, Bloomberg reported.

About 90 million shares worth over $2 billion exchanged hands, double the fund’s usual volume and more than any other U.S. ETF that day. GDX is the largest materials ETF and tracks corporations that are primarily involved in mining gold and silver.

In addition, Bloomberg also 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 metric tons, by the end of January from 59.56 million ounces a month earlier, according to data on the bank’s website. In tonnage terms, it added about 11.8 tons last month after taking in just under 10 tons in December, which was the first time the PBOC had boosted its hoard since October 2016.

China, the top gold producer and consumer, is beefing up holdings amid signs of slowing growth and uncertainty about whether the trade fight with the U.S. will get resolved. Central banks worldwide added the second-highest annual total on record in 2018 as heightened geopolitical and economic uncertainty drove them to diversify reserves, according to the World Gold Council.

“We are not surprised that the gold purchases resumed,” Carsten Fritsch, senior commodity analyst at Commerzbank AG, said in an email. “We were rather surprised that the hiatus took so long. China possesses only a relatively small amount of gold in its foreign exchange reserves. Hence, there is still a need to buy.”

While China’s holdings are the sixth largest by country, they account for only 2.4 percent of reserves, compared with more than 70 percent in Germany and the U.S., WGC data show.

The increases come against a backdrop of rising prices. Gold rose for a fourth month in January, topping $1,300 an ounce, as the Federal Reserve signaled it was done raising interest rates for a while, pivoting away from its bias toward tighter policy.

Individual investors and funds have also been adding to holdings in exchange-traded funds, lifting the worldwide total to the highest since 2013 amid volatility in equity markets and concerns that the U.S. may face a recession. Last month, ETF holdings increased 70.6 tons, the most since February 2017.

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Gold prices have climbed as investors uncertain about global growth outlook hedge their portfolios, The Wall Street Journal reported.
investors, gold, wsj, precious metal
Friday, 22 February 2019 03:09 PM
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