Most money pumped into gold ETFs since October 2012
Gold on Monday consolidated recent gains sparked by safe haven buying after Switzerland's bombshell currency and interest rates move, the fallout from the collapse in the price of oil and the rampant dollar.
In light trade on the New York Mercantile Exchange due to a public holiday in the US, gold futures advanced some $12 an ounce from Friday's close to trade at $1,277 an ounce – the highest since early September. Last week the metal gained more than 5% and is now trading over $90 up in 2015.
Silver's move on Monday was more pronounced particularly give thin volumes of electronic trading. March contracts rose 3.5% or $0.60 to $17.71 compared to Friday's close. Earlier in the day the precious metal briefly traded above the $18 level. Silver is up almost 12% in 2015 after losing 20% of its value last year.
Roughly 60% of silver buying is for industrial use with investment and jewellery demand making up the remainder. Silver price jump comes despite weakness in other industrial metals like copper which is trading near five-year lows after a disastrous start to the year.
Despite the rally, investors in exchange traded funds backed by physical gold and silver were reluctant to commit fresh money to the sector.
Prompted by the currency turmoil, copper's collapse and a stock market correction, retail and institutional investors last week were finally convinced to increase their exposure to precious metals.
Last week saw a the biggest jump in holdings in the dozens of gold-backed ETFs listed around the globe since October 2012 – the run up to the all-time record of 2,632 tonnes reached in December that year.
New inflows of 22 tonnes saw total holdings increase to a total of 1,621.9 tonnes. At the start of the year holdings declined to a low of 1,595.6 tonnes – levels last seen April 2009.
SPDR Gold Shares (NYSEARCA: GLD) – the world’s largest gold ETF holding more than 40% of the total – enjoyed net additions of 23.3 tonnes in just two days.
Wednesday last week GLD holdings fell to the lowest since September 2008 at the time of the collapse of Lehman Brothers and the onset of the global financial crisis.
On the Thursday and Friday following the Swiss central bank announcement investors snapped up 23.3 tonnes in GLD pushing – an indication of just how much investors were spooked by the latest central bank shenanigans.
Inflows into physical silver-backed ETFs last week amounted to 71.2 million tonnes for a total of 19,452.2 tonnes. That's still well below record levels in October of 20,182 tonnes.
Even before the Switzerland surprise Marc Faber, economist, investment guru and Wall Street stalwart, predicted a bull run for gold based on a loss of confidence in the world's monetary system:
“I’m positive [that] gold will go up substantially [in 2015] — say 30%,” Faber, whose investment letter is called the Gloom Boom Doom Report, said at Société Générale’s global strategy presentation in London on Tuesday.
“My belief is that the big surprise this year is that investor confidence in central banks collapses. And when that happens — I can’t short central banks, although I’d really like to, and the only way to short them is to go long gold, silver and platinum,” he said. “That’s the only way. That’s something I will do.”
Image of lakeside benches in the shape of gold bars in Kreuzlingen, canton of Thurgau, by Sascha Erni