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As gold hits fresh high, Wall Street wonders about a mystery buyer
By Bob Henderson
The Wall Street Journal
Friday, April 12, 2024
Gold futures closed at their latest record-high Friday. Analysts are struggling to understand why.
Front-month futures gained 1.3%, or $30.50 a troy ounce, this week and settled at $2,356. Gold has advanced 14% this year.
Several Wall Street experts have lately speculated about who has been buying and pushing prices up.
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Chris Mancini of the GOLDX mutual fund said that gold prices typically fluctuate with the flows of money in and out of exchange-traded funds such as GLD that hold physical metal, but that outflows from ETFs in recent months suggest that, "there must be physical buyers that we aren't able to see." One big driver of the rally, Mancini said, could be individuals in China who are seeking a hard asset to hold in the face of a faltering real estate market.
Christopher Wood of Jefferies said there has been no evidence of pickup in sales of American Eagle gold coins in the U.S. and that the physical premium of gold bars and coins trading in Singapore are "only a normal 1-2%" compared to 7-8% seen in the last bull market in 2011 and 2012. "The most plausible explanation remains demand from China," he said, but "there is a lack of concrete data to confirm such an explanation."
Daniel Ghali of TD Securities said there has been a "striking correlation between the mystery buyer's appetite and ongoing currency depreciation pressures," particularly in China and Japan. A country could potentially put upward pressure on its currency by selling U.S. Treasurys and buying gold, said Ghali. "What's curious," he said, "is that there clearly appears to be a very strong sense of urgency associated with this buying activity."
Central banks have bought gold in large quantities ever since Russia's invasion of Ukraine in early 2022, largely because of gold's performance in times of crisis, according to polling by the World Gold Council. But WGC data available for this year has not yet revealed a pickup in central bank buying.
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