Gold ETP Inflows Soar Amid Price Rise

November 25, 2014

Gold inflows to exchange traded products have rallied to their highest level since February last year as investors take advantage of the yellow metal’s 2.4 percent gain in price and the possibility that mine production will be cut.

The combination of gold falling to its marginal cost of production, which is estimated at $1,100 per ounce, and investors believing that mine production for gold will be cut in 2015 has helped to tighten supply [pushing prices up], according to ETF Securities.

Nitesh Shah, associate director in research and Martin Arnold, director and global FX & commodity strategist at the ETF provider, said: “Gold inflows rose to their highest since February 2013 last week following a 2.4 percent gain in price.”

The gold price hit a high on Friday of $1,205.23 per ounce, according to www.goldprice.org, but yesterday slipped to just below $1,200 an ounce, while stocks climbed to near record highs on the back of news that Iran and Western powers agreeing to a seven-month extension on nuclear talks.

After failing to reach a deal to curb Iran's nuclear program, the two sides agreed to push the deadline to July 1, 2015. A complete collapse in the talks or a grand bargain could have had significant geopolitical repercussions, but for now, little has changed, according to a note from HAI.

It said: “Gold slipped just slightly as prices continued to hover just above and below $1,200. The yellow metal was last trading down by $2.91, or 0.24 percent, to $1,198.64, while silver edged up by $0.04, or 0.25 percent, to $16.48.”

The gold price is also likely to be impacted later this week when Switzerland votes on whether their central bank retains 20 percent of its assets in gold.

Shah and Arnold said: “At the end of this week the Swiss population will vote on whether to require their central bank to hold 20 percent of its assets in gold. While opinion polls only show 38 percent of the population is in favour of the proposal, there is a risk there will be more support on the day. If the proposal does pass, we would expect a sharp rally in gold.”

Gold has been a hot topic in recent weeks as it comes back from one of its worst performances in 2013. The question now is whether this is a trend that is likely to continue or a passing fad.

 

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