Can gold's rally last as ETF investors continue to ignore the market

Can gold’s rally last as ETF investors continue to ignore the market

Welcome to Kitco News’ 2023 Outlook Series. Uncertainty continues to dominate financial markets as central bank monetary policies push the global economy into a recession to cool down inflation. Stay tuned to Kitco News to learn from the experts on how to navigate turbulent financial markets in 2023.

(Kitco News) – The new 12 months is proving to be a strong begin for the gold market as costs finish the week close to a nine-month excessive.

The gold market has rallied for five-straight weeks as costs are up greater than 5% in the first month of 2023. And whereas there’s robust bullish sentiment in the market as a result of, there’s nonetheless one piece of the market lacking.

Investors are nonetheless not leaping into the market, inflicting some analysts to query how sustainable this new rally is. While gold costs have rallied 5% this 12 months, knowledge from the world’s largest gold-backed exchange-traded fund, SPDR Gold Shares (NYSE: GLD), reveals that ETF demand continues to fall.

As of Jan. 19, GLD’s gold holdings have dropped 5.21 tonnes. The query is: does the value observe broader funding demand, or will ETF purchases choose up to mirror the bullish sentiment in the market? The outflows in the ETF market have slowed, however they have not ended.

At the similar time, there are issues that silver just isn’t seeing the similar bullish sentiment as gold. After outperforming gold by means of November and December, silver seems to be treading water at round $24 an oz..

Silver’s lack of momentum can also be a stark distinction to what’s occurring in different industrial metals like copper, which is buying and selling at a seven-month excessive of round $4.26 a pound.

It will take a while for these market divergences to work themselves. Still, there are causes to be hopeful that investors will finally see the worth in holding treasured metals.

This week Bank of America published a very bullish report on gold; the analysts mentioned that they count on the treasured metallic to be a mainstay asset for the subsequent three years.

And Bank of America just isn’t alone in its bullish outlook. In November, European fund manager HANetf surveyed 100 European and British wealth fund managers. According to the outcomes, 89% of these respondents mentioned they meant to enhance their publicity to gold.

“It now could also be the case that quite a lot of the adverse sentiment in the direction of gold has handed,” mentioned Tom Bailey, head of ETF analysis at HANetf, in the report.

As to what’s driving sentiment in treasured metals, the greatest issue continues to be weak point in the U.S. greenback; the U.S. greenback index has fallen greater than 10% since its 20-year excessive in September.

According to analysts, the U.S. greenback is dropping momentum as markets count on the Federal Reserve to gradual its aggressive tightening cycle. Markets have all however fully priced a 25 foundation level transfer from the U.S. central financial institution subsequent month.

In an exclusive interview with Kitco News, esteemed economist David Rosenberg said that he expects the February meeting to be the Federal Reserve’s last hike. He added that the impending recession will drive the central financial institution to begin slicing rates of interest someday in the second half of the 12 months.

In this surroundings, he expects gold to be a sexy asset and sees costs rallying to new report highs above $2,000 an oz. this 12 months.

With a lot bullish sentiment in the market, many analysts assume it is solely a matter of time earlier than investors bounce again into gold.

On a ultimate observe, the Kitco News crew would really like to want everybody a contented Lunar New Year and will the Year of the Rabbit be affluent for everybody.

Disclaimer: The views expressed on this article are these of the writer and will not mirror these of Kitco Metals Inc. The writer has made each effort to guarantee accuracy of knowledge supplied; nonetheless, neither Kitco Metals Inc. nor the writer can assure such accuracy. This article is strictly for informational functions solely. It just isn’t a solicitation to make any alternate in commodities, securities or different monetary devices. Kitco Metals Inc. and the writer of this text don’t settle for culpability for losses and/ or damages arising from the use of this publication.