Wall Street returning to the gold bandwagon

Precious metals-backed exchange-traded funds reach new highs
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Published : 10/21/15
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Republished with permission from Mike Fuljenz, specialist in U.S. gold coins and gold market analyst, who provided the following information on gold market trends in his October, Week 3, issue of  Metals Market Report.:

"We predicted long ago that Wall Street would probably give up the first $100 gain in gold before they got on the gold bandwagon, since they are basically 'trend followers,' not contrarian analysts. Sure enough, last week’s bullion holdings in 'GLD' (the largest gold exchange traded fund, or ETF), representing the net new purchases of gold for that fund, reached their highest levels since July 24, when gold was trading around $1,080. Gold-backed ETFs have increased their gold position in four of the last five weeks. In just two days in early October, GLD increased its gold position by 12 metric tons, to a total of over 700 tons.

"Part of gold’s recovery is due to a flat dollar. (Since the Fed has delayed raising rates, currency investors are impatiently selling their dollars, since they are growing tired of waiting for an interest rate increase.) Whenever the dollar falls, gold gains a currency 'tailwind' for U.S.-based investors in gold.

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"Last week, we wrote about France’s bank, Societe Generale, turning favorable on gold. This week, we heard from Germany’s Deutsche Bank, which now says that the prospects for gold are looking 'rosier.' They now expect gold and silver to benefit from weaker economic data, which is causing 'a longer pause before FOMC members can credibly signal a first policy rate hike, thereby keeping interest rates low.'

"In Asia, the Development Bank of Singapore (DBS Group Holdings) is currently holding an 'overweight' position in gold bullion. They upgraded gold to 'overweight' in mid-August.

"In addition, billionaire hedge fund manager Paul Singer said in a financial seminar in Tel Aviv: 'I like gold. I believe it’s under-owned. Every institutional portfolio should be 5-10 percent invested in gold to protect against zero interest rates that are degrading the value of paper currency.' He also said that 'Gold is the only real money.' More specifically, he said that gold is a 'real asset to protect against inflation, government policy and/or diversification from stocks and bonds.' By contrast, he said major developed economies are 'hopelessly and utterly insolvent once long-term entitlements are added in.' "

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