Gold back in fash­ion af­ter $15 tril­lion global sell­off

The Pak Banker - - MARKETS/SPORTS -

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.

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