Investors Take Cover as Gold ETFs Post Longest Run in a Decade

October 9, 2019

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Bloomberg – As global tensions escalate and signs of a slowdown mount, more investors are turning to gold. Worldwide holdings in bullion-backed exchange-traded funds have expanded for 17 days in a row, the longest run of inflows since 2009.

The total stash now stands less than 35 tons away from a record set in 2012, according to the latest tally by Bloomberg. The consistent influx has come even as prices struggled to extend gains above $1,500 an ounce in recent weeks.

Bullion has climbed in 2019 as the U.S.-China trade war hurts global growth and central banks loosen policy. The rise in ETF holdings comes as investors fret that high-level talks between Washington and Beijing set for later this week are unlikely to yield a breakthrough. In addition, Federal Reserve Chairman Jerome Powell hinted on Tuesday at the possibility of another interest rate cut.

“Gold inflows are likely to persist,” Citigroup Inc. said in a note, sticking with its forecast for a rally to $1,700 an ounce over six to 12 months. “Markedly weak manufacturing and services ISM data show that the slowdown in global trade is starting to bite the U.S. economy.”

Spot gold, a traditional haven and beneficiary when investors shun risk, edged lower on Wednesday as markets digested news that China is still open to agreeing a partial trade deal with the U.S., according to an official with direct knowledge of the talks.

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Still, there’s been a series of warnings this week about risks, encompassing the trade standoff and other long-running frictions. Societe Generale SA Chairman Lorenzo Bini Smaghi said a hard Brexit could plunge the world into recession and would be a disaster for the financial system. Kristalina Georgieva — in her first major address as head of the International Monetary Fund — warned that global economy is now looking at a “synchronized slowdown.”

“Gold obviously stands to benefit” if China and the U.S. can’t reach a mini deal this week, Adarsh Sinha, co-head of Asia FX and rates strategy at Bank of America Merrill Lynch, told Bloomberg TV Wednesday.

Gold was 0.2% lower at 11:08 a.m. in London. The Bloomberg Dollar Spot Index declined 0.1%.

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