While there is a “pretty robust increase in risk appetite,” with a higher dollar also weighing, inflation expectations are keeping gold supported, Bart Melek, head of commodity strategies at TD Securities, told Reuters:
“We’re not saying that there’s going to be an inflation problem right away, but the concern is that if the policies continue and are repeated post election, then we would likely see both a lower dollar and real rates that will likely move lower.”
Meanwhile, the global equities market is headed for a one-month high as hopes for more stimulus offset Europe’s rising numbers of coronavirus cases and lockdowns, keeping gold in check.
Bullion is still up 24% so far this year, owing to unprecedented government and central bank stimulus worldwide to revive economies, as it is viewed as a hedge against inflation and a safe haven asset during economic and political uncertainties.
“It’s going to move higher, it’s going to be volatile. That’s going to be true for the next month going into the election, it’s going to be true for the two months after the election,” Jeffrey Christian, managing partner of CPM Group, told Reuters.
Gold ETF milestone
Despite gold prices being subdued by a strengthening dollar and the shift in investor attention towards riskier assets, global holdings in gold-backed exchange-traded funds (ETFs) and similar products remains high.
According to the latest report from the World Gold Council (WGC), total ETF holdings worldwide rose for the tenth consecutive month in September, surpassing the 1,000-tonne mark for the first time ever in a calendar year.
By the end of September, gold ETF holdings increased by 68.1 tonnes ($4.6 billion) — or 2% of assets under management (AUM) — despite bullion’s worst monthly performance since November 2016.
Global net inflows of 1,003 tonnes ($55.7 billion) in 2020 have led overall gold investment demand and taken the gold ETF holdings universe to a fresh new all-time high of 3,880 tonnes and $235 billion in AUM, the Council notes.
Regionally, North American funds led the way again in September with inflows of 34.6 tonnes ($2.2 billion).
European funds added 26 tonnes ($1.9 billion), while Asian funds added 6.8 tonnes ($432 million) as two new funds launched in China for a second straight month, bringing the total number of new funds in Asia to seven this year.
Collectively, gold ETF AUM has grown about 67% year-to-date through September.
(With files from Reuters)