Daily Management Review

Statements of the American authorities pushed up demand for gold


Total assets of the funds investing in gold, updated the ten-week maximum, approaching the mark of 2.24 thousand tons. The growing interest in the precious metal is taking place against the background of the involvement of new countries in trade disputes with the United States, as well as the Fed’s readiness to support the American economy. If geopolitical risks and soft actions are preserved by the American regulator, gold quotes have a chance to rise to $ 1,500 per troy ounce.

BullionVault via flickr
BullionVault via flickr
Assets of exchange-traded index funds investing in gold updated the two-month maximum. According to the latest data from Bloomberg, they increased by 15 tons, to 2.24 thousand tons. This is the maximum value since March 29. During the week of rapid growth, the assets of the funds grew by almost 46 tons. The surge of interest in the precious metal from professional investors had a positive impact on its value. On Friday, the price of gold rose to a maximum since April 19, 2018 - $ 1,348.1 per troy ounce, which is 3.2% higher than the close of the previous week. On Monday, prices fixed at $ 1,328 an ounce.

The last time investors so rapidly increased their investment in gold was in early February 2017. Then, against the background of US President Donald Trump assuming the office, concerns about the future policy of the new Head of State grew. Despite the fact that he acted within the framework of election promises, a number of his new statements and actions caused nervousness in the financial markets. As a result, for the week ending February 10, the assets of the gold funds grew by more than 47 tons, to 1.98 thousand tons.

The current growth of assets is associated with the foreign economic steps of the US President. In late May, Donald Trump announced plans to introduce a 5 percent customs duty on Mexican goods.

This trend is expected to continue until the authorities stop the flow of illegal migrants. The tension is growing in the Chinese direction. Beijing, in response to a rise in duties from the US, has announced plans to limit the export of rare earth metals, which may be critical for American manufacturers of electronic components. “Duties against Mexican imports will have an insignificant economic effect.” However, the fact that President Trump mixes elements of political and economic pressure, as well as his unpredictability, including with regard to China, heightens uncertainty in financial markets. This affects willingness of investors to take risks and will provide short-term support for gold through improved sentiment in the futures market and increased demand for safe assets,” said Chief Macroeconomist at Julius Baer Norbert Rücker.

Statements by representatives of the US Federal Reserve System have also increased interest in precious metals.

Last week, Head of the regulator Jerome Powell said that the Fed is closely monitoring the effects of trade disputes on the prospects for the American economy and is ready to conduct an adequate policy to support its growth.

source: wsj.com, bloomberg.com