Athletes in London are, apparently, not the only people hunting gold. Investors fearing Mario Draghi's recent pledge to do "whatever it takes" to save the euro will involve printing many of them bought more gold funds last week than any time in the past 12 months.
Athletes in London are, apparently, not the only people hunting gold. Investors fearing Mario Draghi’s recent pledge to do “whatever it takes” to save the euro will involve printing many of them bought more gold funds last week than any time in the past 12 months.
Purchases of physical gold exchange traded products hit $349m after Draghi’s comments stoked fears of inflation – against which gold is a fairly effective hedge.
Draghi suggested the European Central Bank could intervene in government debt markets, if governments sought funding from the EFSF central support mechanism to keep austerity programs on track.
Bond buying could necessitate money printing in Frankfurt, and investors bought the non-inflatable currency of gold as a result.
Today gold rose 0.11% to $1,607.78. The euro is down 0.46% against sterling.
ETF Securities said: “The clear message from all three guardians of the world’s major reserve currencies [the US dollar, sterling and the euro] is that if fundamentals do not improve quickly, more monetary easing and unconventional policies are coming.
“With some form of QE3 from the US [Federal Reserve] getting closer and the ECB clearly indicating that it is preparing for further rounds of bond purchases and other unconventional policies, there are good reasons to believe the gold price will move higher in coming months.”
However, ETF Securities added the ECB’s exact plans “remain a mystery, similar to the lack of clarity that has clouded the bailout mechanism of Spain and its banking sector.”
Investors also bought $13.6m of silver-backed ETCs last week.
By contrast they sold $104m of copper ETCs – sending the industrial metal’s price down as sharply as it has fallen in six weeks – and redeemed $19m from agricultural ETCs on expectations Russia will produce a wheat surplus this year, and an announcement of exports that dismissed talk of possible export bans. Grain prices fell as a result.