Gold price: ETF buying surges to 6-year high

Gold bulls stampede – pick up 50 tonnes in just two days

Gold was enjoying one of its best days of the year on Wednesday jumping as much as $32 an ounce after surprisingly bad economic data from the US put fear back into equity and fixed income investors.

In heavy volume, April gold futures in New York’s Comex market were last exchanging hands for $1,240.40 an ounce, down from a high of $1,254 shortly after data showed the services sector in the US against expectations plunging into deep contractionary mode and coming in at the lowest reading since October 2013. Services constitute more than three-quarters of the US economy.

Gold is experiencing one of its best starts to a year in decades. The metal is up 18% year to date thanks to safe haven buying as investors seek cover from turmoil on financial markets, worries over the economic outlook and the push by central banks around the world into unprecedented negative interest rate territory.

Since the beginning of February, more gold has flowed into the ETFs than was withdrawn in the whole of last year

Following another year of heavy ETF outflows in 2015 – 133 tonnes of net redemptions – investors in physical gold-backed ETFs came roaring back in January paying more than $2 billion for roughly 57 tonnes.

In February the buying only accelerated and this week gold bulls stampeded picking up 50 tonnes in just two days.

In a research note Commerzbank points out that it’s “the sharpest two-day inflow since the Greek crisis first flared up in May 2010.”

The purchases equated to roughly six days of global gold mining production, according to the bank and pushed total holdings in the dozens of ETFs listed around the world to 1,665 tonnes, the highest level in nearly a year:

“Since the beginning of February, more gold has flowed into the ETFs than was withdrawn in the whole of last year.

“ETF investors, who are generally regarded as having a longer term horizon, clearly view the current price level as an attractive opportunity to buy. The high ETF purchases should lend further support to the gold price in our opinion.”