While equities enjoyed one of their best starts to the new year as investors expressed a more risk-on mood, traders still funneled billions into gold and related ETFs to hedge their bets.
Gold prices are up 14% since late August when U.S. benchmark touched new records and are trading near their highest level since last April, the Wall Street Journal reports. COMEX gold futures are now hovering around $1,328 per ounce.
Meanwhile, according to the World Gold Council, gold-backed exchange traded funds saw almost 72 tons of inflows last month, exceeding their total for all of 2018, as investors continued to dive into gold investments.
For example, the iShares Gold Trust (NYSEArca: IAU) experienced $783 million in net inflows, SPDR Gold Shares (NYSEArca: GLD) saw $286 million in inflows, SPDR Gold MiniShares (NYSEArca: GLDM) added $194 million and GraniteShares Gold Trust (BAR) brought in $133 million year-to-date, according to XTF data.
Ongoing concerns over the health of major economies, notably in Europe, have pressured global rates this year, sending yields on many conservative fixed-income assets down. Meanwhile, the non-yielding gold looks more attractive in the more muted interest rate environment since lower rates diminish the disadvantages of holding non-yielding physical assets.
“After the complacency of recent years, investors are realizing they may be overexposed on the equity side and want to build up a hedge,” Maxwell Gold, director of investment strategy at Aberdeen Standard Investments, told the WSJ.
Gold bulls in particular see momentum after the Federal Reserve officials hinted at a more dovish stance on interest rates for this year. According to Fed fund futures, options traders were betting on a 9% chance rates will fall this year and 91% are betting on an unchanged interest rate outlook.
Consequently, more money managers and investors are looking back into gold as a way to hedge portfolio risks as many express lingering concerns over global economic growth and trade conflicts.
“Everywhere they look, investors see problems,” George Gero, managing director at RBC Capital Markets, told the WSJ.
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