ETF Securities: Gold hitting $900 an ounce

ETF Securities comments on gold hitting $900 an ounce: Gold broke through the $900/ounce mark last week for the first time since October 2008. Last week, the gold price rose from $835/oz to $899/oz, a weekly increase of 8% in USD terms and a weekly increase of 15% in GBP terms. With government bond rates rapidly approaching zero, investors look to be increasingly turning to gold as a safe-haven source of return growth.

Gold’s safe haven status continues to attract investors as the UK government announced its second bank bailout on three months last week, fanning market concerns about the health of the financial system. US implied equity market volatility jumped 24% last week, the fastest increase since November.

Gold is also finding favour for investors concerned about the paper value of currencies in the midst of large-scale government debt accumulation worldwide. Sterling reached $1.3503 against the USD on Jan. 23, the lowest since September 1985. Governments worldwide continue to inject stimulus into their respective economies at a rapid rate – the US monetary base (m0) is currently growing at 114% p.a. This is fastest pace of US money supply growth since records began in 1961.

ETFS Physical Gold (PHAU) and Gold Bullion Securities (GBS) saw the largest weekly inflow on record last week with 420,000 ounces worth of ETCs issued. This issuance is equivalent to the quarterly production of the world’s sixth largest gold company. Combined, the assets of PHAU and GBS now total $5.3 billion (£3.9bn) or 6 million ounces. Investors continue to seek assets that are liquid, secure and transparent. ETFS physically backed and collateralised ETC products received record inflows of $581 million last week in this context. Strong physical investment demand is leading to severe stock shortages of bars and coins worldwide, with the Perth Mint forced to suspend orders for at least 1 month in November.