Amidst increasing speculation regarding impending stimulus action by central banks, bullion holdings have fattened to record levels, making gold traders the most bullish they’ve been in nine months.
This month, investors bought $2.78 billion, or 51.7 metric tons, through gold-backed exchange-traded products. Both China and Europe still are in the throes of recovery, as Chinese manufacturing remains at its most anemic since November, while Europe continues to stumble.
Over here in the U.S., minutes from the Federal Reserve’s latest meeting indicated widespread agreement that more stimulus action would likely be necessary. Between December 2008 and June 2011, the Fed led two rounds of quantitative easing, which sent gold up by 70 percent.
“Additional stimulus is inevitable, the question is how it comes,” said Charles Morris, who oversees about $2.5 billion of assets at HSBC Global Asset Management in London. “There’s no doubt about it, this is gold’s moment. All the long-term trend signals suggest that gold is in a very strong bull market.”
Gold was at $1,669.93 per ounce in London last week, or up by 6.8 percent this year. S&P’s GSCI index went up by 4.6 percent, and the MSCI All-Country World Index of equities was up 8.2 percent. Currently, gold ETP holdings are greater than France’s reserves at 2,447.1 tons. Just Germany, Italy, and the U.S. hold even more.
Following the Fed’s recent meeting, gold closed above the 200-day moving average for the first time since March of this year, and it may inch up toward $1,700. The Fed is next scheduled to meet on September 12-13.
At the same time, physical demand for gold has stalled across the world, but this could pick up later this year as Asia experiences its wedding season.