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Gold Prices Steady as Stocks Cut Rally, Money Supply Soars, Covid Claims Half-Million Lives

GOLD PRICES held steady Monday lunchtime in London as Western stock markets gave back an earlier rally after the number of confirmed cases of Covid-19 passing 10 million worldwide, with deaths topping 500,000, writes Atsuko Whitehouse at BullionVault.
Gold-backed ETF investment funds grew for the 14th week in a row last week, while speculative betting on gold prices rising through the US market of Comex futures and options expanded to its largest in 8 weeks.
Spot gold prices today held flat at $1770 per ounce while the Dollar Index – a measure of the US currency's value versus its major peers – slipped after three consecutive daily advances.
Silver dipped 0.1% to $17.80 per ounce while platinum edged up 0.6% to $816 per ounce.
US Treasury bond prices were unchanged, holding yields flat, as the United States passed 2.5 million confirmed infections and more than 125,000 deaths from the global pandemic according to data compiled by Johns Hopkins University., with a spike of 45,255 on Friday alone.
"Gold is benefiting from the growing concern that the Covid-19 has been badly underestimated," said Gavin Wendt, analyst at Australian tipsheet MineLife. 
"Gold is also benefiting from the trillions of dollars of stimulus that is being fed into the economy by central banks and the likelihood of negative real interest rates in the US. It's a double-whammy that's enormously supportive for gold prices that will likely push them to record highs."
"The US monetary base," agrees ICBC Standard Bank's former Tokyo manager Bruce Ikemizu, now chief director of the newly established Japan Bullion Market Association, "has ballooned to $5.15 trillion with the current quantitative easing.
"The correlation between the monetary base and gold is extremely high at 0.909. As long as this money expansion continues gold will rise, perhaps with a view to $3000."
Latest data show that hedge funds and other leveraged speculators in Comex gold futures and options increased their bullish betting and cut their bearish betting on gold as a group in the week ending 23 June.
Overall, that pushed the net long position of Managed Money traders to a two-month high, notionally equivalent to 546 tonnes of bullion and larger by almost 50% from the past 10 years' average.
Including producers, refiners, bullion banks and other participants, the total number of Comex gold future and option contracts open across the market meantime rose back above 1 million – a fresh all-time record when reached in mid-2019, but a level not seen for 5 weeks. 
Gold-backed ETF trust funds also continued to expand last week, with both the SPDR Gold Trust (NYSEArca: GLD) and the iShares gold ETF (NYSEArca: IAU) seeing net inflows.
The GLD grew 0.3% on Friday to reach its largest size in terms of shares in issue in more than 7 years, while the cheaper IAU product also expanded by 0.3% to set a new record size.
Monday found gold prices for European investors down 0.6% to €1567 per ounce as European stocks  advanced ahead of German Chancellor Angela Merkel and French President Emmanuel Macron meeting later in the day to discuss the European Union's proposed €750 billion ($842bn) recovery fund.
UK gold prices in Pounds per ounce edged higher by 0.1% to £1437 per ounce as Sterling weakened on the currency market amid Prime Minister Boris Johnson promising a wave of infrastructure and skills investment, while the first in-person Brexit talks with the EU since March got underway in Brussels.

Atsuko Whitehouse is the Head of the Japanese Market at BullionVault and the Editor of Japanese GoldNews.

See all articles by Atsuko Whitehouse here.

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