Gold has replaced investors with imports – Newspaper Kommersant No. 62 (7507) dated 04/11/2023

The assets of international funds investing in gold rose above the level of 2.9 thousand tons for the first time in two months. Growth took place over the past four weeks, including against the backdrop of rising quotations of the precious metal. However, interest in the metal has recently begun to decline against the backdrop of the US financial crisis and strong inflation data, which has already affected the price of the metal, which has fallen below $2,000 per ounce. On the Russian market, interest in the metal remains as a protective asset against ruble depreciation.

According to the agency Bloomberg, at the end of last week, the assets of exchange-traded funds (ETFs) investing in gold exceeded 2.9 thousand tons, updating the maximum since the end of January. Over the past four weeks, the assets of the funds have grown by more than 46 tons. Moreover, the main increase occurred in mid-March, when, against the backdrop of the acute phase of the banking crisis in the US, the assets of the funds grew by almost 22 tons. In the following weeks, interest in gold gradually decreased, and at the end of the last week, the growth amounted to about 3 tons.

Decrease in demand for the metal was facilitated by the decrease in investors’ fears about the crisis in the US financial sector after emergency support measures.

In particular, the Fed launched a new program to support banks, under which more than $300 billion in liquidity was provided to credit institutions in the first week of the crisis alone. Under such conditions, the S&P 500 index returned above 4,000 points at the end of March.

On Monday, April 10, the index was near 4093 points, having added 7.5% relative to the local low in mid-March. “The rise in the index reflects increased demand for risky assets, which negatively affects the gold ETFs,” said Alexei Golovinov, chief analyst at PSB.

As the banking crisis subsided, the probability of easing the Fed’s monetary policy has decreased, especially since unemployment in the country continues to decline. In March, the number of employed in the US economy, excluding the agricultural sector, increased by 236 thousand people, as a result, the unemployment rate dropped to 3.5%. “Due to strong economic statistics, futures for the Fed rate again shifted to the zone of its increase at the next meeting, although a week ago the situation was the opposite,” notes Alexei Golovinov. In such conditions, the yield of ten-year Treasury bonds (UST) on Monday exceeded 3.42% per annum, having added 17 basis points in three days.

An increase in UST yields, combined with a decrease in investor demand for the precious metal, has a negative impact on its value. On Monday, the price of the metal fell to $1,985 a troy ounce, down 1% on Friday and 2.3% off Wednesday’s high, according to Investing.com. “We see a local attenuation of inflationary trends and a reversal of Treasury yields against the backdrop of the situation in the US banking sector. This forces investors to fix their positions in gold,” says Artem Mayorov, director of the asset management department at Ingosstrakh-Investments Management Company.

At the same time, interest in the precious metal remained on the Russian market.

According to InvestFunds, in March, private investors invested about 600 million rubles in mutual investment funds focused on investing in gold, which is almost twice as much as investments a month earlier.

This is facilitated by the weakening of the Russian currency, which increases the interest of Russians in defensive instruments such as gold. Since the beginning of the year, the dollar exchange rate on the Moscow Exchange has increased by 17%, to 81.6 rubles/$, and only since the beginning of April it has gained more than 5%. According to Alfa Capital portfolio manager Dmitry Skryabin, the sharp depreciation of the ruble raises questions about the way to save and will help maintain demand for gold within the Russian Federation. Moreover, the rise in dollar prices for the metal may resume in the near future. “The situation in the US banking system can hardly be called favorable. A new round of bankruptcies of financial organizations is quite likely,” notes Alexey Golovinov.

Vitaly Gaidaev