Gold Prices Rise As Investors Reach to Hedge Their Portfolios

February 22, 2019

Concerns over a slowing global economy are making investors buy gold again.

According to the World Gold Council, gold-focused exchange-traded-funds notched nearly 72 tons of inflows last month, exceeding their total from last year. Added to this is the fact that gold prices are up 14% since late August.

As anxiety over economic growth and trade conflicts between the U.S. and China grows, money managers seeking to hedge their portfolios are looking to gold after the asset’s borrowing costs fell.

Fed funds futures, which investors use to bet on the direction of Fed policy, showed that 9 percent believe rates will fall this year, while nearly 91 percent are betting they will be unchanged.

Maxwell Gold, director of investment strategy at Aberdeen Standard Investments, said that “After the complacency of recent years, investors are realizing they may be overexposed on the equity side and want to build up a hedge.”

However, it’s not only investors that have recently begun to seek out gold. According to TD Securities, gold holdings at global central banks have increased by roughly 13% – or 3,900 tons – since 2009. To put those numbers into perspective, this means that central banks bought the most gold by volume last year since 1967, according to the World Gold Council.

Bart Melek, head of commodities strategy at TD Securities, expects central-bank gold holdings worldwide to grow by another 800 tons over the next two years.

Countries such as China, Russia, Turkey, and Kazakhstan have also increased their gold pile with China purchasing nearly 10 tons in 2018.

The final word comes from Hakan Kaya, a portfolio manager at Neuberger Berman, who says that “A lot of people see a bad moon rising, and if you want to have a downside hedge, gold is the instrument.”


Doc Wellington

Retirement Insider