It is fair to say gold has had a good start to 2016.
The rally is explained by a number of influences including a sell off in Chinese equities and negative interest rates now in place in Japan as well as Europe. A flight to safety has ensued.
Bloomberg have a market update and report on the situation.
“The economic woes sparking turmoil for global equities is a boon for gold, with prices trading above $1,200 an ounce for the first time since June.
Spot bullion climbed as much as 2.3 percent, the biggest intraday gain in two months. Shares of precious-metal producers surged. The 30-company Philadelphia Stock Exchange Gold & Silver Index of shares rose as much as 6.2 percent. Newmont Mining Corp. was the third-biggest gainer among stocks tracked by the Standard & Poor’s 500 Index.”
Investors have already added $2.6 billion to Gold based Exchange Traded Funds (ETF’s) which compares to the $2.7 billion they withdrew in all of 2015, the third year of spot gold prices falling.
From Reuters, more of the same news and commentary:
” “The drive for gold today is purely tied to the risk type of trade,” said Eli Tesfaye, senior market strategist for brokerage RJO Futures in Chicago, pegging the next target level at $1,210.
“People have to move their equities out of there, have to put (money) into safer assets.”
U.S. gold for April delivery GCJ6 settled up 3.5 percent at $1,197.90 an ounce.
Also adding to the positive sentiment was continued strong inflows into gold-backed exchange-traded funds (ETF). On Friday, SPDR Gold Trust (GLD), the world’s largest gold-backed ETF, said its holdings rose 0.7 percent to 698.46 tonnes.
“We are seeing non-stop buying from the investment community and little selling of note,” one trader said, adding that ETFs and other investment funds were moving into gold as a safe haven.
Traders said gold’s 5 percent gain last week, its biggest weekly rise since July 2013, had also made many investors more convinced that the metal’s rally since the start of this year was sustainable.
Some recent weak economic data, particularly from the United States and China, has led financial markets to expect there will be fewer U.S. rate hikes this year than the four they had been pricing in a few weeks ago, perhaps only one.”
This has been an excellent beginning to 2016 and market sentiment seems to think the rally can be sustained.
Time will tell.