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Gold Price Eyes Huge Breakout as ETF Buying Spree Reaches 10-Year Milestone

Last Updated September 23, 2020 1:07 PM
Sam Bourgi
Last Updated September 23, 2020 1:07 PM

The price of gold advanced Wednesday amid a constant influx of capital into the safe-haven asset, a sign that investors were hedging their bets against global macroeconomic instability.

Gold Price Sees Renewed Upside; Silver Follows

Futures on December gold climbed all the way to $1,516.90 troy ounce on the Comex division of the New York Mercantile Exchange. The contract was last up $9.20, or 0.6%, to $1,513.10 an ounce.

Gold price
The price of gold continues to hold well above $1,500 an ounce, but a return to six-year highs remains elusive for now. | Chart: barchart.com

Silver futures, which often track closely with gold, climbed 12 cents, or 0.7%, to $17.82 an ounce.

Gold’s premium over silver declined 0.2% to 84.71. That’s how many ounces of silver are needed in exchange for one ounce of gold bullion.

The U.S. dollar index (DXY), which normally tracks inversely with precious metals, declined slightly against a basket of world currencies Tuesday. DXY was last down 0.1% to 99.08. The greenback began the fourth quarter at two-year highs as signs of a pervasive dollar shortage began to emerge.

Gold ETFs See Massive Inflows

Demand for gold is not only coming from the futures market, but from long-term investors concerned about global macroeconomic instability.

Inflows into gold-backed exchange traded funds (ETFs) have expanded for 17 straight days, the longest streak since 2009, according  to Bloomberg. The total amount of gold held in these funds now stands just 35 tons shy of the record high set in 2012.

Bullion’s draw as a safe-haven investment is likely to send prices higher in the short term, according to Citigroup. The bank is calling for gold to hit $1,700 an ounce over the next six-to-12 months. This year, gold has traded at record highs in virtually every major currency except the U.S. dollar.

Gold’s safe-haven magnet will also strengthen in light of weakening global growth. Kristalina Georgieva, the International Monetary Fund’s new head, warned Tuesday  that the global economy is in the midst of a “synchronized slowdown” that could worsen if trade conflicts aren’t resolved.

Under President Trump, the United States has sought to rewrite the terms of trade with several countries it has accused of using unfair trading practices. Washington has signed new trade accords with Mexico, Canada and Japan, but a comprehensive deal with China remains elusive.