Thursday, April 12, 2018

Trade wars and hot wars continue to be great catalysts for equity driven gold buying

Over the past few days one of the more interesting trends that has taken place has been the rush into buying equities at a time when the threat of both trade wars and hot wars (supposedly) have the markets rattled.  But even with these potentially disastrous events looming on the horizon, investors are not ignoring safe haven assets, they are simply buying different ones than in the past.

April 11 saw an incredibly weak auction for 10 year bonds, but gold on the other hand had one of its best single days of the year.  And this trend has not been limited to just yesterday as investment into the precious metal has been growing not primarily in the physical metals market, but in the equity driven ETF paper one.

As the anticipation for a US and China trade war continues, market participants are beginning to plan accordingly. As initially reported by Bloomberg, investors are starting to flock to gold as holdings in all bullion-backed exchange traded funds is at its highest level since 2013. 
The bullion-backed exchange traded funds have risen for four straight days which is the longest run since January. As a side note, the third largest commodity-linked ETF (Xetra-Gold) now has 177 million shares outstanding, which is the most since the fund started trading in 2007. 
Other notable gains from gold ETF’s include: 
China’s Bosera Gold ETF which is on track to see its most significant returns since being listed in 2014. The ETF has added $610.8 million this year. Also, iShares Gold Trust ETF has seen the addition of $1.49 billion in 2018. 
Clearly, the market is beginning to price in a trade war between two of the world ’s largest economies, and many fear the aftermath could be rampant inflation. – Gold Telegraph
Over the past few weeks, the gold price has consolidated a new floor of between $1320 and $1330, but still has been unable to break through and close above the strong resistance level of $1355.  But this may be coming fairly soon as the sector is on a trend of higher highs and higher lows, which forecasts an eventual bursting of that price ceiling.

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