Gold pro­vok­ing in­vest­ment du­al­ity

The Star Early Edition - - INTERNATIONAL - Luzi Ann Javier

GOLD is split­ting the in­vest­ment com­mu­nity down the mid­dle.

Take the flows into and out of ex­change-traded funds.

Money’s been drain­ing out of SPDR Gold Shares, the world’s largest gold-backed ETF used by big in­sti­tu­tional in­vestors, each week since Novem­ber 11.

But iShares Gold Trust, a smaller ri­val favoured by in­di­vid­u­als in­vest­ing lesser amounts for them­selves, has seen back-to-back weekly in­flows.

Large mu­tual, pen­sion and hedge funds are chas­ing bet­ter re­turns in ral­ly­ing US stock mar­kets thanks to Pres­i­dent-elect Don­ald Trump’s pro-growth poli­cies.

Re­tail in­vestors in­clud­ing iShares Gold hold­ers are re­turn­ing to gold amid re­newed con­cern that Trump pro­tec­tion­ism will re­strict global trade and growth.

Those con­cerns were shared by more than two-thirds of traders sur­veyed by Bloomberg News last month, who fore­cast prices would rally this year as po­lit­i­cal un­cer­tain­ties drive de­mand for haven as­sets in­clud­ing bul­lion.

Gold fu­tures gained 1 per­cent to set­tle at $1 184.90 (R16 237.87) an ounce on the Comex in New York on Mon­day.

Prices have risen 5.4 per­cent since hit­ting a 10-month low on De­cem­ber 15. Peo­ple fa­mil­iar with China’s plans said last week the na­tion is pre­pared to re­tal­i­ate should Trump take puni­tive mea­sures against Chi­nese goods and trig­ger a trade war be­tween the two big­gest economies.

Last week, in­vestors pulled $307.1 mil­lion from SPDR Gold, while iShares at­tracted $80.8m, ac­cord­ing to data com­piled by Bloomberg.

“It looks like the hot money is show­ing a real neg­a­tive sen­ti­ment to­wards gold and it’s ex­press­ing that in GLD,” Eric Balchu­nas, an ETF an­a­lyst for Bloomberg In­tel­li­gence, said, re­fer­ring to SPDR Gold by its ex­change ticker.

“Re­tail in­vestors and ad­vis­ers seem to be con­tin­u­ing their al­lo­ca­tion to gold through th­ese other ve­hi­cles,” in­clud­ing iShares Gold, he said.

Former US Trea­sury sec­re­tary Lawrence Sum­mers last week said in­vestors were far too san­guine about the risks of Trump’s poli­cies, which an­a­lysts at Eura­sia Group said could con­trib­ute to a level of global in­sta­bil­ity not seen since World War II.

Sum­mers also said Trump’s plans for dereg­u­la­tion were set­ting the stage for the next fi­nan­cial cri­sis.

Gold may rally to $1 300 at the end of 2017, ac­cord­ing to the me­dian of the 26 es­ti­mates by an­a­lysts and traders sur­veyed by Bloomberg News last year from Sin­ga­pore to New York.

While the un­cer­tain­ties are send­ing re­tail in­vestors and over­seas buy­ers to the gold mar­ket, in­sti­tu­tional in­vestors are un­load­ing their bul­lion in favour of higher re­turns in US eq­ui­ties, as the Dow Jones In­dus­trial Av­er­age hov­ers near 20 000.

Last week, $15 bil­lion poured into eq­uity ETFs, as $106 mil­lion was with­drawn from funds backed by pre­cious met­als, data com­piled by Bloomberg show. Eq­ui­ties have ral­lied since Trump’s elec­tion amid ex­pec­ta­tions of ac­cel­er­at­ing eco­nomic growth.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.