Gold is back in fashion on Wall Street.
In the three months through September investors snapped up 157 metric tons of the yellow metal worth approximately $10 billion, new research from the industry group World Gold Council shows.
That was a staggering increase of 56% versus the same period of 2022.
It matters because investment demand tends to be what determines whether the price of gold rises or declines. When investors pile into gold in a heavy way then it tends to increase. When they don’t, prices of the metal tend to fall.
The inflows coincided with a 3.8% drop on the price of the SPDR Gold Shares exchange-traded fund over the same three month period, according to data from Yahoo Finance. The ETF tracks the price of bullion and is the largest such fund in the world.
Since then the price has rallied 9.2% during October recently fetching $1999.9 a troy ounce, according to data from the London Bullion Market Association.
The recent move comes on the back of escalating tensions in the Middle East that began with Gaza-based terror organization Hamas invading Israel on October 7 and massacring 1,400 Israelis.
As the war continues, and other parties — such as Hezbollah in Lebanon, Houthi rebels in Yemen, and bad actors in Iraq and Syria — have become involved in the conflict. Investors tend to add gold to their portfolio during times of geopolitical turmoil including wars and military conflicts.
The worry this time is that the conflict envelops the entire Middle East region. If that happens then expect gold prices to rise future.
Investors Flee Bullion ETFs over Last 12 Months
One interesting thing that did happen in the third quarter is a drop in holdings of gold held in ETFs. Cumulative net outflows of bullion from ETFs and similar products over the 12 months through September 30 totaled 934 metric tons, worth approximately $60 billion.
This is is speculation, but it may be that some buyers of gold would rather hold the physical metal than an electronic receipt of an ETF share. That could be particularly true of people wishing to move wealth out of war-tore areas, or who anticipate that they may need to do so in the future.
Gold is fungible pretty much everywhere on the planet and can help open doors to people fleeing wars. While the legality of doing so
Miners lag
Separately, gold mining stocks have lagged the metal since the beginning of October, rising a mere 6.9% not including dividends, according to data from Yahoo.
That shouldn’t be too surprising. While gold miners do tend to do well when gold prices are rising, they are also negatively impacted by a generally weaker stock market.
Indeed the stock market has been somewhat weak over the last month. The S&P 500 index was down 2.8% during the month through October 30 as investors worried about the war and the possibility of the Federal Reserve raising the cost of borrowing money.
Still, these could be good times for gold investors as the war and the potential actions of the Fed raise the level of uncertainty.
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