As gold ETFs, including the SPDR Gold MiniShares (NYSEArca: GLDM) and SPDR Gold Shares (NYSEArca: GLD), rallied last month, holdings of bullion in those funds surged, too. In June, gold traded near its highest levels in a year as, at least for part of the month, investors leaned toward defensive assets.
Gold ETFs are pushing to upside amid increased expectations of a U.S. rate cut, even as some investors locked in profits from bullion’s recent rally. Gold is believed by many investors to be inversely correlated with interest rates. Rising interest rates make bonds and other fixed-income investments more attractive, so money will flow into higher-yielding investments, such as bonds and money market funds, and out of gold, which offers no yield at all during times of higher interest rates, and back into gold ETFs.
“Gold holdings by global exchange-traded funds soared in June, rising by 127 tonnes to 2,548 tonnes, the World Gold Council reported on Tuesday,” reports Kitco News. “The increase occurred amid geopolitical uncertainty and as central banks, including the U.S. Federal Reserve, signaled a shift to a more accommodative monetary policy over the coming months, the World Gold Council said. This drove market-set rates and the U.S. dollar lower, sending gold prices to a six-year high.”
Go For Gold
Boosting the case for gold is that the Federal Reserve recently alluded to no more rate hikes for the rest of 2019 after initially forecasting two. The capital markets initially expected rates to remain steady after the central bank spoke in more dovish tones following the fourth and final rate hike for 2018 last December.
“ETFs based in North America posted inflows of 65 tonnes, while those in Europe rose by 59 tonnes. Holdings of gold by Asian ETFs rose by 2.4 tonnes, while those from other regions had a 0.4-tonne increase,” according to Kitco.
Data suggest European investors also embraced gold ETFs last month.
“European ETFs now account for their largest percentage of total global gold ETF assets in history at 47% of the total, the World Gold Council said,” reports Kitco.
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