Gold’s allure intensifies as equities, oil prices turn lower; High demand for ETFs

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The demand for gold has significantly increased in recent weeks. Sales are driven by the concern of many investors of impending turmoil in the financial markets and global economic recession.

A retreat in equities on the back of sliding oil prices, coupled with high demand for precious metals and gold exchange-traded funds (ETFs) has led to a significant increase in the price of gold on Tuesday.

Gold rose by about 1 per cent as European shares fell and inflows into bullion funds continued, boosting prices.

Assets in SPDR Gold Trust, the top gold-backed exchange-traded fund (ETF), rose more than 19 tonnes to 752.29 tonnes on Monday, the highest since March 2015.

Spot gold was up 1 per cent at $1,220.21 an ounce by 1453 GMT.

The fund’s inflows since the beginning of the year have already surpassed outflows for the whole of 2015.

Gold has gained about 15 per cent since the beginning of the year, largely on the back of concerns over financial instability and economic growth that led to turmoil in international stock markets. It has also benefited from the repricing of expectations for US interest rate rises.

It is expected that the ECB could further lower the negative interest rates on its deposit facilities in March 2015. The attempts to impose restrictions on spending cash are interpreted by many market participants as the first signs of financial repression.

Numerous European banks have already restricted the ability of their customers to withdraw cash. For instance, the Swiss National Bank prohibited a large hedge fund from withdrawing cash out of its bank account to avoid negative interest rates.

Investor sentiment remain largely bullish and was evident in fund flows. On an intraday basis, gold prices are expected to trade higher. Uncertainty across financial markets is leading investors for flight towards safe haven.

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