Gold shining as markets turn volatile

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When the world goes into turmoil., gold takes Victor’s spoil. It may sound dramatic but in financial market parlance, this means that higher uncertainty in financial markets provides support to gold prices.

Right now various factors are supporting gold prices. There are concerns about the growth of the global economy. China’s recovery seems to be losing momentum, Germany has fallen into a technical recession. There are Geopolitical tensions in Europe, China getting closer to Russia and G7 countries showing cohesion against China on various fronts.

US headwinds

For central banks, the focus is shifting from inflation to growth. The interest rate hike by central banks seems to be in the last stage. This means the rate hike cycle won’t continue for long. Even though inflation came out stronger than expected in the latest reading.

On top of that, there is uncertainty regarding the US debt ceiling. Generally, when there is uncertainty investors move towards safe haven like gold and US bond yields.

Now anticipated pause in rate hikes decreases the charm of interest-yielding bonds, couple this with debt ceiling concerns in the US and there is downward pressure on USD. All this is providing support to gold prices.

However recent development in the US like the debt ceiling agreement and increase in PCE helped the dollar on Monday and gold has remained flat. Since March gold prices have increased from $1820 per ounce to $1945 per ounce.

As a result, gold ETF holdings have gone up. So, let’s have a look at the gold ETF buying trend. According to World Gold Council, total gold ETF holdings as of 19th May stood at 3,483.7 tonnes. With maximum holding in North America at 1,776 Tonnes. EU had 1,526.4 Tonnes, while for Aisa it stood at 63.9 Tonnes. If we look in value terms. Total Assets Under Management by Gold ETFs are $ 220.1BN.

Looking at country-wise, the maximum amount of Gold ETFs holding is in US (1,706.7 Tonnes). 2nd place is held by UK (695.5 Tonnes) and 3rd place by Germany (394.9 Tonnes). China is in 7th position (49.1 Tonnes) and India at 8th position (37.6 Tonnes).