Gold Soars To Three Month High

Published on Feb 14, 2022 12:08

COMEX Gold futures shot up to a three month high near $1870 per ounce as inflationary fears boosted bullish sentiments. Escalating global Geo-political worries due to the Russia-Ukraine standoff also boosted the metal. Annual inflation in the Organisation for Economic Cooperation and Development (OECD) area soared to a 30-year high in December last year. The inflation rate climbed to 6.6%, hitting the highest level since July 1991 from 5.9% in November and 1.2% in December 2020, according to OECD data. This increase was driven in part by a surge in annual inflation in Turkey (to 36.1% in December, after 21.3% in November), read an OECD statement. In December 2021, energy prices jumped by 25.6% compared to December 2020, while food prices soared by 6.8% over the same period, the OECD said. The fund buying also remained strong for Gold.

The World Gold Council (WGC) stated that Global gold ETFs drew net inflows of 46.3 tonnes (US$2.7 billion, 1.3% of AUM) in January, led by North American funds - partially offsetting the region`s 2021 outflows. These combined with positive flows from Europe significantly outweighed Asian outflows. Overall, net inflows were driven largely by gold price strength and a sharp selloff in equity markets, despite a reversal in the gold price on the back of a hawkish US Fed statement towards the end of the month. North American Gold ETF inflows of 49.0 tonnes in January (US$2.9bn) were concentrated in US funds, which tend to be more reactive to changes in the gold price than other regions.

WGC noted that a significant jump in the gold price leading up to gold ETF options expiration likely contributed to some of the inflows. This resulted in positive flows as gold rallied by nearly 3% in the first part of January to reach an intra-month high of US$1,847/oz. The majority of US inflows coincided with this move, supported by a flight-to-quality amid a selloff in equity markets.