Gold News

Gold ETF Growth Fails to Stop Price Falling $140 from All-Time High Even as Real Rates Hold at Negative Record

GOLD PRICES fell to 1-week lows in US Dollar terms on Thursday, extending a drop that's come even as US interest rates lag the pace of inflation by a record margin, and despite repeated investor inflows to gold-backed ETF trust funds.
Twice touching $1927 in London trade today, the gold price fell as the US Dollar rose to 1-week highs on the currency market, before bouncing $10 per ounce as today's New York session began.
Asian and European stock markets meantime followed yesterday's fresh US records higher again, extending this week's rise to new all-time highs in the MSCI World Index.
With gold now $140 below the new all-time high of $2075 set 4 weeks ago, real US bond yields are meantime virtually unchanged, with the interest rate on 10-year TIPS continuing to trade at a record low of -1.08% per annum.
Longer-term, real yields' negative correlation with gold prices has grown increasingly strong over the last decade, showing an r-squared of nearly 60% on 52-week data across the last 5 years.
"We continue to see the long-term trend higher," says a trading note from Swiss bank Credit Suisse, "reinforced by falling US real yields and a falling US Dollar."
As a group worldwide, gold ETF trust funds – giving investors exposure to moves in the metal with no ownership – expanded for a 6th session running on Wednesday according to Bloomberg data, needing an additional 5.6 tonnes of bullion to back their shares in issue.
The giant SPDR Gold Trust (NYSEArca: GLD) shrank marginally while cheaper competitor the iShares gold ETF (NYSEArca: IAU) expanded to a new record.
More than twice the size of the IAU, the GLD has now failed to expand for 5 sessions running.
Over the 20 sessions since 6 August, when gold bullion's benchmark price peaked at $2067, the GLD has now expanded only 3 times.
Over the 20 sessions leading up to that peak, it grew on 12 trading days, leading one gold ETF promoter to say " there's no question...that demand is driving gold [prices] right now."
Chart of gold priced in Dollars, last 1 month. Source: BullionVault
Shares in giant miner Barrick (NYSE: GOLD) are meantime flat from 4 weeks ago, closing last night at $29.61 – only 10 cents above the price of 7 August – and erasing last month's pop after legendary investor (and long-time gold naysayer) Warren Buffett took a position in the world's 2nd largest gold miner for investors in his Berkshire Hathaway (NYSE: BRK.A) conglomerate.
Like Barrick, shares in No.1 listed gold miner Newmont (NYSE: NEM) fell today in pre-market trade, sliding 3.3% below their price when gold bullion peaked.
Central banks were net sellers of gold as a group in July, according to a blog post from the mining-industry's World Gold Council, whose data show heavy selling from crisis-stricken Venezuela, with Russia and Mongolia trimming their holdings while Kazakhstan, India and Turkey expanded.
Crude oil meantime fell with gold prices, losing 2.5% on US benchmark WTI.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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