'Refreshed Gold Bulls' Drive Commodity ETFs - Bloomberg Intelligence
(Kitco News) - Commodity exchange-traded funds (ETFs) inflows point to anexcitement in the gold market, according to Bloomberg Intelligence commoditystrategist Mike McGlone.
“Dominated by precious metals, inflows indicate a gold marketthat continues to gain favor despite rapidly increasing financial assets,”McGlone said in a note published on Thursday.
Growing demand for diversification is also contributing to therising enthusiasm within the commodity ETFs, the note added.
“The three-quarters of commodity exchange-traded funds that trackprecious metals indicate patient bulls. The dollar value of precious-metals ETFholdings is up 25% since the end of 2016 to $110.5 billion, more than doublethe pace of the Bloomberg Precious Metals Spot Subindex,” McGlone said.
Gold -market recovery is projected to continue to five-year highs,with steady ETF holdings, the commodity strategist said.
“Though down slightly from the December peak, total known goldETF holdings reached their highest since May 2013. Indicating an early-stagerecovery that's maturing into more of a sustained bull market, gold futuresmanaged-money net positions and open interest are well off similar 2016 peaks.Absent some unforeseen force, gold is poised to revisit resistance levels atthe highs from 2013-14,” McGlone wrote.
Rising gold ETF holdings are a sign of investors getting worriedabout rising financial assets,the note added.
“Indicating divergent strength, gold appears on a solid footingregardless of the record-setting stock market. Despite slipping last year tothe lowest level relative to the S&P 500 in a decade, gold and ETF flowshave been resilient,” according to McGlone. “When record-low stock market volatilitymean-reverts, gold should be a primary beneficiary. A stock market peak shouldaccelerate gold inflows.”
Bloomberg Intelligence sees gold prices coming into resistance at$1,400.
“[Gold] is still recovering from the sharpest decline below its26-week moving average in three years at the end of 2016. Since that low, dips2% below this mean have marked bottoms,” McGlone said.
By Anna GolubovaFor Kitco News
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