Gold: Exchange-traded fund holdings reach three-year high
After plateauing last month, gold inflows into physically backed products resumed again in early August, expanding holdings to the highest level in three years.
Subsequently, gold prices too are approaching the highs set in July against a backdrop of falling interest rates and lingering economic uncertainty.
Yesterday’s cut in interest rates by Australia’s central bank and expectations that the Bank of England will likely follow next week, are painting a picture of sluggish inflation and looser monetary policy – a positive for gold investment demand. After last week’s softer-than-expected US gross domestic product numbers, the resulting pullback in the US dollar has also been a tailwind for gold prices.
Given increasingly bullish sentiment, we expect that gold price volatility will remain heightened, not least through profit taking on any positive economic news. Heading into Friday’s US payroll data, we maintain our neutral outlook on gold prices.
Warren Kreyzig is a Commodities Research analyst at Julius Baer