Gold back in fashion after $15 trillion global selloff
The $15 trillion rout in global equity markets since May is reawakening the lure of gold for investors seeking safety. Hedge funds more than doubled their netlong position in bullion last week, just three weeks after they were the mostbearish ever. Investor holdings of gold through exchange-traded products are expanding at the fastest pace in a year, and the value of the ETPs has jumped by $3 billion in 2016.
Bullion has seen a revival of its appeal as a haven after being mainly ignored last year in the face of the Paris terror attacks in November and the Greek bailout negotiations in July. This time around, concerns about global markets will support the metal, Citigroup Inc. ana- lysts led by Ed Morse said last week as they raised their 2016 price forecast. "People have become complacent about risks, whether it's macroeconomic and geopolitical," said George MillingStanley, the Boston-based head of gold investments at State Street Global Advisors, which oversees $2.4 trillion. "What's out of fashion may be coming back. That atmosphere of people feeling completely calm and untroubled, I think, is starting to go away.
Gold is a very good risk-off trade, and I think people are starting to look very, very carefully at the risky positions that they have on a number of other markets." Futures gained 4.2 percent in January to $1,105 an ounce on the Comex in New York, heading for the biggest monthly gain in a year. The net-long position in gold futures and options reached 1,934 contracts in the week ended Jan. 19, according to U.S. Commodity Futures Trading Commission data released three days later. That's up from 902 a week earlier and compares with a record net-short holding of 24,263 held at the end of last year. Investors poured $926 million into ETFs backed by precious metals so far in January, the latest data compiled by Bloomberg show. That's on pace for the biggest monthly expansion in a year. Holdings in global gold ETPs have risen above 1,500 metric tons to the highest since November.
Gold fell 10 percent last year as investors awaited the first increase in benchmark interest rate by the Federal Reserve since 2006, which finally came in December.