Gold exchange traded funds are back on one of their seemingly unstoppable runs as the precious metal soared to over $1,670 an ounce on Wednesday morning.
“Weak U.S. GDP data and a drop in the July manufacturing ISM highlight the fragility of the U.S. recovery, and the potential need for a third round of quantitative easing later this year,” said Daniel Wills and Nicholas Brooks at ETF Securities in a precious metals report.
“Standard & Poor’s has highlighted that $4 trillion of cuts are necessary to stabilize U.S. debt, well above the $2.4 trillion in the government compromise, indicating continued risk of the U.S. losing its AAA rating,” they wrote in a weekly update.
Moody’s and Fitch affirmed their triple-A credit ratings on the U.S. after the debt deal but warned that downgrades were possible in the future, Bloomberg reported.
Holdings in exchange traded products backed by gold have climbed to a record of more than $110 billion. [ETF Assets Rise]
This rebound in ETF interest “has been accompanied by a 39% rise Comex speculative futures positioning in July – to the highest level in 9 months,” the ETF Securities analysts said. “Comex silver, platinum and palladium speculative futures holdings are also up between 30% and 48% over the past month.”
In Europe, S&P has warned it may downgrade Spanish debt, and Italian bond yields continue to soar “indicating sovereign risk issues will remain key risks and interest in stores of value will remain strong on a medium-term basis,” they added.
Gold ETFs such as SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) were set for a higher open Wednesday.
iShares Gold Trust
Full disclosure: Tom Lydon’s clients own GLD.
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