Gold Assets Top 2,000 Tons as the Clamor for Havens Grows Louder

(Bloomberg) -- Global gold holdings topped 2,000 metric tons for the first time in three years as the Brexit fallout and speculation that U.S. interest rates won't rise anytime soon sent investors hunting for a haven.

Holdings in bullion-backed exchange-traded funds rose 4.1 tons to 2,001.4 tons on Wednesday, data compiled by Bloomberg show. That's larger than gold reserves held by China, the biggest consumer and a consistent central-bank buyer in recent months. The latest increase followed the biggest one-day gain since 2009 in the SPDR Gold Shares, the largest gold ETF.

Global assets in the funds have surged 37 percent this year and prices are near a two-year high as slowing growth, negative rates in Europe and Japan and the likelihood that the Federal Reserve won't hike further combined to boost demand. The U.K.'s vote last month to quit the European Union has added further impetus to that pro-bullion mix. Gold has likely entered the early stages of the next bull run, according to UBS Group AG, while ABN Amro Group NV says prices may hit $1,425 this quarter.

“Investment demand has been very strong, with institutional buyers of ETFs the big gorilla in the room,” said John Butler, a vice president at GoldMoney, which provides custodian and investment services in Toronto. “We've reached a psychological tipping point where people see a material increase in the risk of a repeat of what we saw in 2008.”

Strong Demand

Client demand has been so strong recently that GoldMoney has struggled to keep up, he said.

Gold for immediate delivery added 0.2 percent to $1,366.91 an ounce by 10:46 a.m. in London, according to Bloomberg generic pricing. Prices reached a two-year high on Wednesday and a seventh daily advance would be the longest run since February.

The ETF holdings compare with the 1,808.3 tons held by China, according to figures from the World Gold Council. They're also about twice the size of Switzerland's holdings and a quarter of the stash kept by the U.S.

The Fed is losing confidence in its need to tighten any time soon as officials face rising uncertainty about the outlook for growth at home and abroad, according to minutes released Wednesday of a meeting held before Britain's vote. In Europe, there's speculation policy makers may add to stimulus, as well as mounting concern about weakness in Italy's banking industry.

Central Banks

“The emergence of central banks collectively being more inclined to possibly deepen QE programs, including the Fed neutrality stand, have been a very good tailwind for gold,” said David Lennox, a resource analyst at Fat Prophets in Sydney.

Bank analysts have been raising forecasts as gold rallied. UBS increased its short-term target to $1,400 an ounce from $1,250, according to a July 5 note. Singapore-based Oversea-Chinese Banking Corp. has also flagged the potential for bullion rising to $1,400, while Goldman Sachs Group Inc. boosted its three-, six- and 12-month targets. In a July 6 note, ABN Amro's Georgette Boele raised her end-of-quarter forecast by $75 to $1,425.

In other metals:

• Silver for immediate delivery was little changed at $20.1075 an ounce.
• Platinum and palladium were also little changed.

To contact Bloomberg News staff for this story: Feiwen Rong in Beijing at frong2@bloomberg.net, Jasmine Ng in Singapore at jng299@bloomberg.net. To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Nicholas Larkin, Tony Barrett

With assistance from Jasmine Ng, Feiwen Rong