- Gold has once again proved to be the safe haven of choice in periods of uncertainty and high volatility.
- State Street fund holds more of the precious metal than some central banks as price passes $2,000
An exchange traded fund has become one of the world’s biggest owners of gold, surpassing even the central banks of Japan and India, as investors have scrambled to buy the precious metal and pushed it to record highs.
SPDR Gold Shares, an ETF that owns physical bullion rather than just financial derivatives, has hoovered up gold this year as investors seeking price gains or a haven asset channel more money into the fund. – FT
The price of gold soared to a record $2,047 (£1,538) on Wednesday as investors panicked by fears of a second wave of the coronavirus pandemic rushed to buy the yellow metal as a safer place to store their wealth.
The gold price has risen by 34% since the start of the year, and this week broke through the $2,000 an ounce barrier and kept rising, as investors worry about Covid-19, as well as rising geopolitical tensions and the weakening of the US dollar.
“I can think of no clearer demonstration of gold’s role as a store of value than the enthusiasm with which investors across the world have turned to the metal during the unique social and economic turmoil of the past few months.”
“Gold has once again proved to be the safe haven of choice in periods of uncertainty and high volatility.”
Ruth Crowell, chief executive officer of the LBMA
One single ETF, SPDR Gold Shares, bought 15 tonnes of gold on Monday and Tuesday this week, taking its total holdings – secured in HSBC’s London vaults – to 1,258 tonnes. That holding is more than four times as much as the Bank of England has in its reserves.
DID YOU KNOW
In total, ETFs hold 3,800 tonnes of gold worth about $2.4tn – getting close to the 4,581 tonnes held by the US mint in Fort Knox, according to World Gold Council research. The US government holds total gold reserves of 8,130 tonnes, making it by far the largest holder.
WHY THE SURGE?
“In times of uncertainty people head to gold, and this is a very uncertain time,” he said. “Interest rates are so low, that if you put your money in the bank it earns you next to nothing or potentially the bank even charges you to look after it.”
Juan Carlos Artigas, head of research at the World Gold Council
Analysts at Bank of America Merrill Lynch predict that the price of gold could reach $3,000 an ounce by early 2022.
What could be the price of gold in five years?
Jim Rickards, a US financial pundit and gold speculator, reckons that gold could even hit $15,000 by 2025.
“If you’re going to have a gold standard or even use gold as a reference point for money, if you need to restore confidence in the dollar, the implied non-deflationary price is $15,000 an ounce,”
The size of the fund’s holdings which are held in HSBC’s London vaults — has climbed to 1,258 tonnes.
On Monday and Tuesday alone it added another 15 tonnes, roughly five times as much as Michael Caine’s bank robbers lifted in The Italian Job, based on the $4m value of the gold taken in the 1969 film.
FT
