If you are a current gold investor, you have to love the latest monthly statistics just published by the World Gold Council.
After years of a death by a thousand cuts inflicted by endless redemptions of gold ETFs and ETNs, recent reports showed a sudden influx into the barbarous relic.
North American ETFs led the charge, with some 28.8 metric tonnes valued at $1.3 billion pouring into the funds.
The SPDR Gold Shares (GLD) took in the most, 22.4 tonnes worth $1.03 billion, followed by the IShares Gold Trust (IAU), which added 4.6 tonnes worth $266 million.
Europe followed with 6.4 tonnes worth $321 million.
Asia was a net seller of 2 tonnes worth $80 million as investors pulled money out of precious metals and placed it in Bitcoin, Ethereum, and other cryptocurrencies.
Global gold-based ETFs collectively hold 2,295 metric tonnes of gold valued at and have picked up 143.5 tonnes so far this year.
For those used to using American measurements of precious metals, there are 32,150.7 troy ounces in one metric tonne.
The figures augur well for continued cash inflows and higher gold prices.
My experience is that sudden directional shifts of fund flows like this are NOT one-offs. They continue for months, if not years.
Of course, the trigger for these large inflows was the yellow metal’s decisive breakout on big volume from a two-year trading range.
Not only did now longs pile into the market, there was frantic short covering as well.
Too many options traders had gotten comfortable selling short gold call options just above the $1,800 level.
Once key upside resistance was shattered, gold tacked on another $50 very quickly. Bearish traders were smartly spanked.
Gold plays that did well, including Van Eck Vectors Gold Miners ETF (GDX), Barrick Gold (ABX), Newmont Mining (NEM), and Global X Silver Miners ETF (SIL), turned profitable.
There are six reasons why gold has gone off to the races.
1) Ten-year Treasury bond yields are peaking out at 5.0%. The opportunity cost of holding gold is about to drop sharply.
2) Falling interest rates guarantee a weaker US dollar, another big pro gold development.
3) The last of the pandemic stimulus is fading fast.
4) The new conflict in the Middle East has poured the fat on the fire.
5) General concerns about the increasing instability in Washington have driven nervous investors into EVERY flight to safety play.
6) The collapse of trust in crypto has propelled a lot of assets back into gold.
Inflation has historically been the great driver of all hard asset prices.
After such a meteoric move, I would expect gold to consolidate here around this level for a while to digest the recent action. It may drift sideways, or fall slightly.
That’s when I’ll pick up my next basket of longs.
