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By Jack Farchy
Gold prices were closing in on $1,800 an ounce for the first time this year on Friday, as mounting disquiet about the inflationary impact of US monetary easing and action by other central banks drove investors to the precious metal.
As recently as three months ago, investors were questioning the sustainability of the gold bull market, which has lifted the metal from $250 to almost $2,000 in the past decade.
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But the promise of open-ended “quantitative easing” in the US, and sovereign bond buying from the European Central Bank, has reinvigorated gold bulls with high-profile investors lining up in support.
Investors in exchange traded funds have raised their bullion holdings to a record 2,681 tonnes, according to Edel Tully of UBS.
On Friday, gold prices hit a new 11-month high of $1,795 a troy ounce and traders are increasingly targeting last year’s record of $1,920. In euro terms and Swiss franc terms, the metal hit a record high this week.
“I think gold should be a part of everybody’s portfolio,” said Ray Dalio of Bridgewater Associates, the world’s largest macro hedge fund manager, in a recent CNBC interview. “We have a situation now when you have too much debt. Too much debt leads to the printing of money to make it easier to service. All of those things mean that some portion should be in gold.”
Bill Gross of Pimco, the world’s largest bond fund manager, this week warned that if the US did not address its budget deficit “bonds would be burned to a crisp and stocks would certainly be singed”. He concluded: “Only gold and real assets would thrive.”
Other high-profile investors including George Soros and John Paulson have recently added to their gold holdings, according to regulatory filings.
“A lot of people outside the market are saying this is too big a story, you’ve just got to be in gold,” said Jon Spall, head of precious metals sales at Barclays. “One of the things you really could see propel gold is if those people who have been sceptical say, OK, I’ve just got to be in this market.”
