Gold has climbed to $1,370 per troy ounce this morning, its highest level since March 2014. As such it has also exceeded the high it achieved on the day when the result of the Brexit referendum was announced nearly two weeks ago. It is presumably being boosted by weak stock markets and falling bond yields: yields of ten-year US Treasuries for example have dropped to their lowest level in at least 50 years, while yields of ten-year German government bonds have hit a new all-time low. Gold ETFs saw inflows of 38.1 tons yesterday, their highest daily inflow since November 2009. According to data from Bloomberg, yesterday’s inflow was broad-based, though by far the largest volume was attributable to the SPDR Gold Trust. Apart from the gold ETFs tracked by Bloomberg, China’s largest gold ETF has also reported massive inflows this morning. According to the manager of the Huaan Yifu Gold ETF, the fund’s holdings as of yesterday totalled around 17.6 tons or 1.8 billion outstanding shares. At the end of 2015, only 320 million shares were apparently in circulation. Nonetheless, the Chinese gold ETF is relatively small by international standards. The SPDR Gold Trust – which is the world’s largest gold ETF – holds just shy of 983 tons, while the largest gold ETF in Europe (ETF Securities) has holdings of almost 276 tons. Investment demand is extraordinarily strong, in other words. We see no good reason for this trend to be reversed at the present time. Clearly markets will continue to be preoccupied by Brexit for some time to come, which means that uncertainty among market participants should remain high. The US Federal Reserve is likely to take its time before implementing any further rate hikes. We are therefore raising our forecast for the gold price at year’s end by $100 to $1,350 per troy ounce.
