Investors seeking allocated gold

Another weak day for gold and silver yesterday has continued during Asian and European trading today, with gold falling below $1,750 and silver once again trading under $32.50. Yesterday brought mixed economic news: one the hand, claims for unemployment benefits in America shot higher while corporate earnings from giants such as Google disappointed; but strength in the Philadelphia Fed’s manufacturing survey gave the bulls something to cheer about. The Dollar Index gained 0.40%, with the greenback also strengthening against a broad basket of emerging-market currencies, as that familiar “risk off” trading returned.

Action in gold at the moment may be disappointing for some, who may have been expecting an endless string of new highs following the Fed’s “QE to infinity” announcement on September 13. However, under the surface things are still moving in a decidedly bullish direction. Bloomberg reported on Monday that while gold holdings in exchange-traded products are growing at a slower pace than in 2004-2009, this is “because some investors may be moving to physical bullion after initial purchases of an exchange-traded fund”. Barclay’s Cengiz Belentepe commented: “The question is whether the pace of buying has slowed, or whether the people have become a bit more sophisticated in recognizing [sic] the costs and liabilities”, with more people seeking allocated metal accounts.

In other words, trust in the financial system is decreasing, which can only be good as far as gold is concerned. And as the World Gold Council reported in its just-released Q3 commentary on the gold market, the yellow metal gained 11.1% during Q3. What will we see by the end of the year, considering the winds that are now at its back in the form of unprecedented central bank stimulus efforts?

Author: The GoldMoney News Desk

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