Holdings of gold by exchange-traded funds keep rising as a number of factors keep pushing prices higher, said Commerzbank analyst Carsten Fritsch. Comex June gold hit a high of $1,748.90 an ounce overnight, its most muscular level since April 24, although the metal has since backed down to $1,740.10 as of 7:42 a.m. EDT. July silver was up 40.4 cents to $16.56 and peaked at $16.705, its strongest level since March 12.
“We believe that several factors are responsible for the surge in gold and silver prices,” Fritsch said. “For one thing, there is the ongoing debate about negative interest rates in the U.S. Furthermore, following the latest speech given by Fed Chairman [Jerome] Powell, hopes of any rapid recovery of the U.S. economy following the corona-induced slump are dwindling. What is more, the further easing of restrictions that this would necessitate would increase the risk of a second wave of infection.”
The situation is similar in Europe, meaning there likely will be more fiscal stimulus and monetary accommodation. “In addition, there are concerns about escalating tensions between the U.S. and China,” Fritsch said, citing an interview in which U.S. President Donald Trump said that he didn’t want to talk to China’s president at the moment and even threatened to cut off relations with China. “Given all of this chaos and confusion, it is hardly surprising that gold ETFs are seeing an unchanged high level of buying interest,” Fritsch said.
He reported ETF inflows of 15 metric tons Thursday, with continuous inflows for 15 trading days totaling 110 tons. The ETFs trade like a stock but track the price of the commodity, with metal put into storage to back the shares.