ETF investors in the West are poised to gather fuel for gold’s record rally By Reuters

By Ashitha Shivaprasad

(Reuters) – Flows into gold exchange-traded funds, particularly from Western investors, will pick up in the coming months, adding another positive boost to already record high bullion prices, analysts said.

Gold prices have risen about 27% so far this year to $2,600 an ounce, directly benefiting from looser central bank monetary policy and pockets of geo-political tension. (EMPTY/)

Interest rate cut cycles in the US, Europe and, more recently, China have fueled bullish sentiment, with players focused on further gains, including another record high of $3,000.

Exchange-traded products (ETPs) or exchange-traded funds (ETFs) allow investors to gain exposure to assets such as gold without taking delivery. Any increase in holdings is significant for prices because ETPs are backed by the physical commodity.

The increase in flows will reduce the supply of precious metal available in the market, further increasing prices. (GOL/ETF)

“Now that the rate cut cycle has begun, we believe ETP inflows will accelerate, supporting the next leg higher in gold,” said analyst Suki Cooper of Standard Chartered ( OTC: ).

“ETP flows, which typically have a stronger correlation with real yields and the dollar, have turned positive. Most of the inflows have come from Europe, but over the past two months, North America has led renewed interest.” (USD/) (US/)

According to the World Gold Council (WGC), global gold ETFs saw inflows of 28.5 tonnes, or $2.1 billion, in August, with all regions reporting positive flows, while Western funds contributed the most. big part.

North America added entries of 17.2 tonnes or $1.4 billion last month. Softer US economic data, favorable Fed comments, declines in the dollar and yields, as well as reduced opportunity costs fueled inflows, WGC added.

This comes after gold ETFs had three straight years of outflows amid high global interest rates. The last four months of inflows have only managed to reduce losses so far to a net flow of 44 metric tonnes.

Last week, the Federal Reserve launched an anticipated round of interest rate cuts with a half-percentage-point cut higher than usual. The European Central Bank cut interest rates in June and also earlier this month.

China’s central bank on Tuesday announced broad monetary stimulus and housing market support to revive an economy facing strong deflationary pressures. Beijing’s new measures include a planned 50 basis point reduction in banks’ reserve requirements.

Major banks such as JP Morgan, Goldman Sachs, Citi and UBS have reiterated their bullish stance on gold and prices are expected to rise as ETF holdings grow.

“Fed tapering is poised to bring Western capital back into gold ETFs, a component largely absent from the bull run seen in gold over the past two years,” Goldman Sachs said in a note.

JP Morgan noted this week that retail-focused ETF accumulations will be key to a sustained further rally in gold and predicted prices would head towards the 2025 peak target of $2,850.

It hit a record high of $2,639.95 an ounce on Tuesday, driven by hopes of further easing in monetary policy and geopolitical tensions. Lower interest rates reduce the opportunity cost of holding zero-yielding bullion and it is considered a safe asset amid turmoil.

“The current basis for fresh demand for ETFs has been that rates are coming down, but the question is whether investors are prepared to buy at such high prices,” said Ole Hansen, head of commodity strategy at Saxo Bank.