Gold’s ETF and retail interest surges and this is just the beginning – Standard Chartered


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(Kitco News)
As gold attempts to conquer the $2,000 an ounce level, ETF and retail interest is waking up, and this is just the beginning, according to Standard Chartered.

“Interest across tactical, ETF, and retail investors surges in March and there is scope for further growth,” said Standard Chartered precious metals analyst Suki Cooper.

Tactical positioning rose at the fastest pace over the past two weeks since June 2019, and ETF flows turned positive for the first time in 10 months.

Investor flows revealed that net positioning “rose by 82.8 thousand lots (k lots), the largest increase over a two-week period since June 2019,” Cooper said Monday.

Since the collapse of Silicon Valley Bank, which triggered the banking crisis, the rise in positioning has been primarily driven by short-covering activity (51k lots) and fresh longs (32k lots).

“Net fund length has surpassed 100k lots for the first time in seven weeks but is well below its peak at 292k lots, suggesting further upside,” Cooper added. “Total metal held in trust across the gold ETPs is set to mark the first month of inflows in 10 months.”

Holdings are still well below their highs, indicating more interest ahead.

Retail interest in gold also jumped in March. The U.S. Mint reported coin sales of 187.5koz, its best-selling March in at least a decade.

From the macro perspective, gold’s two obstacles — a high U.S. dollar and the equity market — are disbanding. “The USD normally benefits from safe-haven demand, and USD strength has been a notable hurdle to gold, but our macro strategists note the current storm is not USD-positive. Equity-market volatility has in the past pushed down gold as a liquid asset amid margin calls, but equity markets have started to firm,” Cooper pointed out.

On the physical side, the market is sensitive to higher prices, with some local premier turning negative, she added.

“Local gold prices in India have re-tested all-time highs, surpassing INR 59,000/10g, and prices in China are re-testing all-time highs above CNY 440/g. India’s market has firmly moved to a discount, and local market participants expect China’s market to shift to a discount as demand has come under pressure from high prices,” Cooper said.

At the time of writing, June Comex gold futures were trading at $2,001.90, up 0.79% on the day.

Another Fed hike to be followed by a cut

Standard Chartered is pricing in another 25-basis-point hike in May, followed by a 25-bps cut later in the year.

“Gold positioning is in stark contrast to that ahead of the final Fed rate hikes during the 1995 and 2000 hiking cycles, with current positioning the highest it has ever been at this stage of a hiking cycle,” Cooper noted. “This time, much of the ‘good news’ for gold may be priced in early.”

This week, Cooper is looking for a weaker employment report for March following unexpectedly strong reports for January and February.

Market consensus calls are expecting 240,000 to have been added in March, with the unemployment rate remaining at 3.6%.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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