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

Alicia Villegas
Alicia Villegas speaks Spanish and Italian and is Iberia Correspondent for InvestmentEurope. She was shortlisted for the Rising Star Award at the British Media Awards 2017 and Writer of the Year at the PPA Independent Publisher Awards 2016. Previously, she worked for almost three years at the seafood business website Undercurrent News as a market reporter. In Spain, she also worked for more than five years for several media outlets.

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