Gold went to a 7-year high in January - February 12, 2020
Gold price went to a 7-year high, while gold-backed ETF holdings broke records in January, reported World Gold Council. We have already written about how it’s a good idea to keep an eye on gold this year. The precious metal’s performance in the first month of 2020 proves this.
Gold had a great January across almost all regions, according to the new study of World Gold Council. As they wrote in their report: “gold-backed ETFs and similar products added 61.7 tonnes (…) boosting holdings to new, all-time highs of 2,947t”. This was combined with a “gold price increase of nearly 5%, assets under management (AUM) grew 8% in US dollars during the month”.
The precious metal’s price also went to a 7-year high, at $1,584/oz. What’s more, after it was one of the best performing assets last year, in January it went on with a further 4.6% growth, making it a great choice for this year so far.
Europe and US in the lead
This growth was fueled by North American and European funds. Europeans bought 33 tons while North Americans 29 tons. Together the two regions spent approximately $3.1 billion on gold-backed ETFs. Asia and other regions remained mainly flat during this period.
These other regions however also drove up gold price in the last years. Especially China and Russia (with other countries like Azerbaijan, Hungary, Iraq, Kazakhstan, Mongolia, Poland, and Turkey) invested heavily in gold. Although they were not buying ETFs, but their central banks were buying physical gold to diversify their investments. (See: Gold is still getting more popular.)
Far from a surprise
Gold historically performs great in this period of the year, but this record-breaking demand is still something to take note of. The reason is simple: this growth is not only about periodical changes, but also about the markets in general.
We have already written about why we expect gold to perform well this year (see: Keep an eye on gold in 2020). In that article we underlined some factors that could further increase prices. These did not change, and we’re not expecting them to do so.
The most important ones are financial uncertainties and low interest rates. The latter may also stay with us for a while. What’s more, some expect that the Fed will cut rates two more times in 2020, which would push gold price even higher.
Low rates and diversification
These low rates may make gold and important instrument in 2020 too. As negative bank rates trickle down to consumers, investing in gold can be a way to protect their wealth and even get some returns relatively safely. The precious metal (both as physical gold and gold-backed ETFs) may also be a good choice for diversification.
Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.