Gold News

Gold ETFs Expand as Inflation Jumps in Europe, Energy Costs Risk Blackouts

GOLD held onto most of yesterday's steep price gains in Asian and London trade Wednesday, cutting last week's 2% drop by one-third for US, Euro and UK investors after gold-backed ETF holdings expanded slightly and as new inflation data continued to set multi-year highs.
 
Gold priced in the Dollar traded in a $14 range above $1794 per ounce while bullion for Euro investors held around €1520, also some 13% below summer 2020's record high gold price.
 
After Spain on Tuesday reported consumer-price inflation of 3.3% per year, Italy today said its cost of living rose 2.5% this August – also the fastest pace since late-2012 on the 19-nation Eurozone's harmonized measure, and also driven by surging energy and fuel prices – and France saw inflation at a 3-year high of 2.4%.
 
Yesterday's US inflation data showed energy costs rising sharply but services prices increasing less quickly than analysts expected.
 
Giant gold-backed ETF investment fund the SPDR Gold Trust (NYSEArca: GLD) ended Tuesday unchanged in size at 1,000 tonnes after seeing its first inflow since end-July on Monday.
 
Smaller competitor the iShares Gold Trust (NYSEArca: IAU) grew 0.1% to 499 tonnes, extending the last week's small total inflows for US-listed gold ETFs.
 
Chart of US inflation vs. US gold ETF holdings. Source: BullionVault
 
Here in the UK, both the headline and so-called 'core' CPI index (excluding energy, food, alcoholic beverages & tobacco prices) rose 3.2% per year in August, the fastest inflation in almost a decade, official data said today.
 
This jump "is likely to be...temporary," says the Office for National Statistics in its commentary, because "the largest upward contribution is a base effect [from] discounted restaurant and café prices" due to the government's Eat Out to Help Out scheme of 1 year before.
 
August 2020 saw UK taxpayers subsidize 160 million meals, with the resulting "free" or cut-price cost of dining out creating month-on-month deflation in the consumer price index of 0.5%, the sharpest drop since July 2007 outside of Januarys, when New Year sales regularly depress the official cost of living versus December.
 
The UK gold price in Pounds per ounce today held above £1300 while UK Gilts joined most other rich-world debt prices in slipping, edging the government's 10-year borrowing cost up to late-June highs above 0.75% per annum.
 
Global stock markets fell meantime, while industrial commodities led by energy rose yet again, taking Brent crude oil above $75 per barrel for the first time since start-August.
 
Investment bank Goldman Sachs today warned clients that Europe may see power blackouts this winter if natural gas and electricity prices continue setting fresh all-time highs.

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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