The largest gold exchange traded fund had the highest investment inflows on Friday since it started trading in 2004.
Michal Cizek/AFP via Getty Images
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Investors are returning to gold as a safe haven after weeks of stock market volatility.
The $59 billion
SPDR Gold Shares
(ticker: GLD), the largest exchange-traded fund backed by physical bullion, had its largest daily net inflow in dollar terms last Friday––about $1.63 billion, or enough to buy 27.6 tonnes gold ––since the fund was launched in 2004.
Buying and selling activity was largely in balance on Monday, so there was no notable creation or redemption of the fund, SPDR said.
Friday’s surge in inflow signals investors’ rising interest in the precious metal––often viewed as a store of value––as the stock market recorded a dismal start to the year. On Friday, the S&P 500’s marked its worst weekly performance since the week ending March 20, 2020.
The
S&P 500
is down 7.8% year-to-date as of Tuesday afternoon and the tech-heavy
Nasdaq Composite
is in correction territory, down 12% for the same period. All S&P sectors, except for energy stocks, are negative for the year. The price of gold has risen 1% this year, to around $1,848 an ounce, and is 4% higher than the beginning of December.
The price of gold surged in 2020 and hit a record of $2,067 an ounce in August that year. Since then, investors’ enthusiasm has retreated as the global economy started to recover from pandemic-forced lockdowns, pushing the stock market to successive record highs.
After adding $15.1 billion in 2020, the SPDR Gold ETF posted a net outflow of $10.8 billion last year. The demand might rise again in 2022, however, and Friday might just be a prelude.
Investors expect the Federal Reserve to raise interest rates four times this year, beginning in March. The Fed members are gathering for their regular policy meeting today and Wednesday amid inflation and stock market turmoil.
“With the S&P 500 hitting new highs some 70 times last year, the possibility of a reversion to the mean was always in the air,” says George Milling-Stanley, chief gold strategist at State Street Global Advisors, “With the Fed having taken a distinctively more hawkish turn in its potential response to inflation, that’s given a number of enthusiastic equity investors pause.”
The expectation of higher rates has cooled people’s willingness to take risky bets on stocks. Bitcoin’s price has tumbled along with equities, and rising tensions between the U.S. and Russia over the Ukraine are stoking stronger demand for safe-haven investments such gold, says Milling-Stanley.
Granted, the SPDR Gold Shares fund is just a small piece of the $12 trillion gold market, according to Milling-Stanley, and its daily trading volume––typically making up less than 1% of the gold market––would not single-handedly move gold prices.
Milling-Stanley and his team believes there is a 50% chance that gold’s price will finish 2022 between $1,800 and $2,000 an ounce, and a 30% chance it could reach above $2,000 an ounce.
Write to Evie Liu at [email protected]
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