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Gold price rally back on track

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The gold price rally resumed on Wednesday as wild swings on financial markets intensified, oil surged by a fifth and physical demand for the metal continued to build.

On the Comex market in New York, gold for delivery in June, the most active contract, jumped by as much as $54.60 an ounce, or 3.2% to $1,742.40 wiping out Tuesday’s decline.

Year to date gold has risen by more than $210 an ounce, or 14% as investors flock to safe haven assets.

“Everybody wants to reexamine gold and it’s not a fringe asset anymore. We’ve been run off our feet”

Peter Grosskopf, CEO, Sprott Inc.

A week ago, gold futures peaked at $1,788 an ounce, a seven-and-half year high as central banks around the world pumped trillions of stimulus dollars into the financial markets to prop up economies brought to a standstill by the covid-19 pandemic.

Peter Grosskopf, chief executive officer at asset manager Sprott, a pioneer of the gold-backed ETF industry, told Bloomberg demand for gold “dwarfs the spike seen during the last financial crisis”:

“Everybody wants to reexamine gold and it’s not a fringe asset anymore. We’ve been run off our feet.

“Even though we’re operating virtually, we cannot keep up with the demand to speak with new clients or interested clients. It just keeps climbing.”

Gold 3,000?

Bloomberg reported Tuesday that Bank of America raised its 18-month gold price target by a full $1,000 to $3,000 an ounce in a report titled “The Fed can’t print gold”:

“As economic output contracts sharply, fiscal outlays surge, and central bank balance sheets double, fiat currencies could come under pressure,” analysts including Michael Widmer and Francisco Blanch said in the report. “Investors will aim for gold.”

That compares to an all-time high just above $1,900 an ounce struck in August 2011 in the aftermath of the global financial crisis.

ETF boom

Global gold-backed exchange-traded funds (ETFs) had $23 billion, or 298 tonnes of net inflows in Q1 2020 – the highest quarterly amount ever and the largest tonnage additions since 2016, the World Gold Council said in its latest report.

During the past year, gold ETFs added 659 tonnes, the highest on a rolling annual basis since the financial crisis, with assets under management (AUM) growing 57% over the same period.

For the month of March, gold ETFs added 151 tonnes for a net inflow of $8.1 billion, boosting holdings to a new all-time high of 3,185 tonnes.