What's going on?
Markets were glittering on Tuesday as the amount of gold held in exchange-traded funds (ETFs) surpassed a record high set seven years ago.
What does this mean?
The gold price has soared in the past month, thanks in part to US-Iran tensions and coronavirus fears. Investors often seek safety in gold during times of uncertainty, as it’s seen as a relatively stable store of value – and for those keen to dive in, the easiest approach is via an ETF backed by bullion and therefore tracking the metal’s value. As money has flowed into those funds, they’ve increased their gold holdings to nearly 2,600 metric tons – the most ever.
Why should I care?
Zooming out: Golden hour.
Gold was already on the up before its most recent surge, with its price rising last year to its highest level since 2013. That’s because the economic environment is pretty conducive to a shiny portfolio. With interest rates ultra-low, many investors would rather keep their money in gold – which may appreciate in value – than in cash that’ll likely see its value eroded thanks to inflation. And with over 80% of investors expecting US interest rates to go lower still in 2020, gold may remain popular for some time yet.
For markets: Pick palladium, or platinum?
Gold’s 18% gains last year were nothing compared to those of fellow precious metal palladium: its price shot up 53%. The surging demand for palladium – used in vehicle “catalytic converters” that turn toxic gases into harmless ones – surprised even the boss of mineral mining firm Anglo American, who told the Financial Times on Tuesday that he’d underestimated the impact of tightening auto emission standards. Supply shortages have boosted palladium’s price even further – but Anglo American’s boss thinks this will eventually cause demand to shift towards platinum, an alternative catalyst component. That’d be good news for investors in both platinum and in Anglo: the company is the world’s largest platinum producer.