Gold News

Gold Prices 'Bullish' as ETFs Swell, Equities Drop with Bond Yields, Only Inflation 'Can Fix Western Debt'

GOLD PRICES jumped in London trade Friday, hitting new post-Trump election highs at $1258 per ounce as the Dollar fell again, reversing the week's prior gains to 6-week highs versus the Euro while world stock markets retreated further from their new all-time highs.
 
Government bond prices rose, pushing longer-term interest rates lower.
 
Gold priced in the US Dollar has now risen for 8 of the last 9 weeks.
 
With the MSCI World Index of global equities hitting new record highs on Tuesday, equity investment funds saw net inflows for the 8th week running, says a note from analysts at Bank of America Merrill Lynch, adding $8.5 billion from 7 days before and $60.8bn for 2017 to date.
 
Now worth an outstanding total of $74bn in contrast, exchange-traded trusts backed by gold have also seen continued inflows, says Dutch bank ING, with the total number of shares in gold ETFs swelling 3% so far this month.
 
"With still a large amount of political uncertainty for this year, this position is likely to continue growing," says ING.
 
With the gap between French bond yields hitting the widest since the Euro debt crisis of 2010-2012, German 2-year Bunds now offer an annual yield worse than minus 0.9%, a fresh record low, on what Bloomberg reckons "looks like [the German Bundesbank] buying at the front end of the yield curve" after a change in European Central Bank rules on national intervention.
 
Chart of 2-year German Bund yields, last 5 years. Source: Bloomberg
 
The Euro's rebound on the FX market curbed gold's gain for French, German and other currency union investors on Friday, edging it back from near 5-month highs at €1188 per ounce, still more than 8% higher for 2017 to date.
 
Gold priced in the British Pound meantime held above £1000 per ounce – a price first seen in mid-2011, and 20% below the peak of 2 months later.
 
Now selling government bonds, "Our long-term outlook [on gold prices] remains bullish," said hedge-fund manager David Einhorn of Greenlight Capital on a call with clients this week for the metal.
 
"The new [US] administration comes with a high degree of uncertainty," said Einhorn – who replaced a gold ETF position with physical bullion in 2009 – "and its policy initiatives appear to be focused on stimulating growth and, with it, inflation."
 
"The Western world has insane amounts of debt," writes MoneyWeek magazine's Merryn Somerset-Webb in the Financial Times, warning that history says it will only be "dealt with by inflation.
 
"Gold is the best hedge there is against that. I still hold it...and I will until the finances of our governments are firmly under control."
 
The giant GLD gold-backed ETF yesterday held onto last week's 0.3% shrinkage even as prices rose Thursday to new 3-month highs.
 
The giant SLV silver trust also held unchanged in size.
 
Silver prices jumped 2% on Friday from last week's finish, trading back at $18.36 per ounce – the level reached just before last June's UK Brexit referendum saw the metal jump 15% in a fortnight to touch 2-year Dollar 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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