Gold boom brings bust fears

The 2020 gold rush in markets is starting to unnerve even some longtime fans of precious metals.

Gold futures are near records, up about 28 percent for the year, while silver has more than doubled since hitting a multiyear low in March.

The moves aren’t entirely surprising, given the scale of the coronavirus-driven economic shock and the countervailing global stimulus led by governments and central banks.

But with the rush into gold has come an increase in volatility that many traders don’t welcome. Both metals have dropped about 6 percent or more from peaks hit this month and are recording bigger daily swings than normal.

“Almost everybody is talking about gold . . . That is a warning signal in a way,” said Luca Paolini, chief strategist at Pictet Asset Management, which is holding more gold than its market benchmark but may sell some if volatility continues. “At least until the election in the US, this volatility will persist.”

Some traders blame the increasing popularity of exchange-traded funds that afford retail and institutional investors alike cheaper, easier access to commodities such as gold, silver and other metals.

They say that while ETFs such as the SPDR Gold Shares Trust marketed by State Street Global Advisors have been part of the market landscape for more than a decade, the surge in ETF buying of gold and silver stands to accentuate price swings, potentially intensifying the boom-bust cycle often seen in these and other commodities.