Gold ETF Buyers Return as Investors Take Cover From Equities

As a rout in energy prices spreads to global equities, investors are returning to gold to take cover.

Assets in the SPDR Gold Trust, the world’s largest exchange-traded product backed by the metal, rose yesterday at the fastest pace since July. The holdings are up almost 1 percent in December, snapping four straight months of losses.

Almost $870 billion was wiped from the value of world equity markets yesterday as oil prices sank to a five year-low. The dollar fell for three straight days against a basket of 10 currencies. After gold last month slumped to a four-year low, prices are up more than 7 percent. Demand has increased for a store of value on signs that central banks in Europe and Asia will boost money supplies.

“The reversal in the equity market has created some volatility, and that’s translating into a little bit of fear and a bid for gold,” Charlie Bilello, the director of research who helps oversee $220 million of assets at New York-based Pension Partners LLC, said in a telephone interview. “An added bonus has been the weakness in the dollar. A combination of all this is pushing people toward gold.”

Assets in the SPDR fund, which counts billionaire John Paulson as its biggest holder, yesterday climbed 2.99 metric tons, or 0.4 percent, to 724.8 metric tons, the biggest increase since July 14. The holdings rose 2.7 tons the prior day.

Gold futures for February delivery fell 1 percent to $1,216.80 an ounce at 9:25 a.m. on the Comex in New York. On Nov. 7, the price touched $1,130.40, the lowest since April 2010. Through yesterday, the metal was up 2.3 percent in 2014 and 1.5 percent this quarter.

“Some short-term institutional buyers have returned to gold as prices have been resilient at current levels,” Tai Wong, the director of commodity products trading at BMO Capital Markets Corp. in New York, said in a telephone interview. “Stimulus measures announced in various countries are bringing some investors to gold.”

(An earlier version of this story was corrected to change the date in the fifth paragraph.)

Before it's here, it's on the Bloomberg Terminal.