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 net-long position in bullion last week, just three weeks after they were the most-bearish 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, Bloomberg reported.
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. analysts 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 Milling-Stanley, 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 3.4% in January to $1,096.30 an ounce on the Comex in New York, heading for the biggest monthly gain since August. 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 reached almost 1,500 metric tons last week. That’s the highest since November.
