Weakening global equities along with the prospect that the Federal Reserve may delay raising interest rate increases are luring investors back into gold. Inflows into U.S. listed exchange-traded funds tracking precious metals are heading for the biggest monthly increase since 2011, data compiled by Bloomberg show. Holdings in global bullion-backed ETFs jumped 49.8 metric tons in the past two days, the most since May 2010, and are equal to almost a week of mine production, according to Commerzbank AG.
Gold has rebounded from a five-year low set in December, becoming this year’s best-performing commodity, as global market turmoil prompted traders to push back expectations for further U.S. interest-rate increases. The prospect of lower-than-expected borrowing costs -- along with volatile equity and currency markets -- is reviving bullion’s appeal as a store of value.
“The main driver in gold trade is safe-haven buying,” said Bob Haberkorn, a senior market strategist at RJO Futures in Chicago. “Investors are worried right now about the Fed.”
Gold for immediate delivery added 1.3 percent to $1,223.98 an ounce at 3:27 p.m. in New York. Gold futures for April delivery advanced 1 percent to settle $1,222.60 on the Comex in New York. Prices are up 15 percent this year.
“As long as financial markets remain fragile and Fed rate hikes remain elusive, inflows will continue,” Carsten Fritsch, an analyst at Commerzbank in Frankfurt, said by e-mail. “It is a clear shift in investor sentiment and therefore an important sign.”
Holdings in global ETPs rose 24.4 tons to 1,665.2 tons as of Monday, the highest in almost a year, data compiled by Bloomberg show. They’re up 203.7 tons this year, more than investors sold throughout all of 2015.
Investors are seeking shelter in gold as money exits equities and other assets. Inflows into U.S.-listed ETFs backed by the precious metal reached $4 billion so far this month, heading for the biggest expansion since July 2011. That compares with $15.589 billion flowing out of international and domestic equities so far in February, according to data compiled by Bloomberg. All asset classes reported net outflows this year except for commodities and fixed income.
Silver futures also rose on the Comex, while palladium and platinum advanced on the New York Mercantile Exchange.