SPDR Gold Trust ETF at New Record

Source:

"Worries of future U.S. inflation. . .will drive more high-wealth investors into gold"

The latest figures of holdings in the world's largest gold ETF—the SPDR Gold Trust (GLD)—showed a new record of 1,236.89 tons (39.767 Moz.) valued at over US$47bn—a 16 ton increase. While the gold price itself has been bouncing nervously up and down around the $1,200 mark, the latest SPDR figure shows there remains a considerable investment appetite for gold as an investment insurance policy.

The world's stock markets are extremely jittery as the prospect of a double-dip recession seems ever closer and substantial falls have been seen in recent weeks, exacerbated by continuing worries over the euro—and now by fears of a new Korean war as North Korea goes on full military alert while South Korea imposes trade restrictions on its northern neighbor over the alleged sinking of a S. Korean warship by a N. Korean submarine. Markets across the globe have fallen by up to 3% or more with the FTSE 100 Index slipping comfortably down below 5,000 this morning. The Japanese market fell 3% and many others are down similarly.

With all the bad economic news and the nervousness about a new Korean conflict involving a nuclear-armed, unpredictable North, it is surprising that gold is not leaping upwards; but, as was seen in October 2008, liquidity problems in one sector force selloffs in others, and some of this could be seen with respect to the gold price. The USD is rising as it is seen as a safer bet than others, which is probably also having a limiting effect on the gold price, but it is the best of a bad bunch and continuing worries about future U.S. inflation and huge unbacked increases in money supply will likely drive more high-wealth investors into gold, thus further benefitting the precious metals ETF sector and, ultimately, the price of gold itself.

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