Commodity Online
NEW YORK: Zooming gold price is adding to the immense value of the exchange trade funds in the yellow and white metals even as commodities continue to attract investors around the world.
Holdings in world's largest gold-backed and silver-backed exchange-traded funds-- SPDR Gold Trust and iShares Silver Trust—are zooming. In the last two months—April and May, the gold and silver funds have surged to touch record levels.
Gold holdings at the SPDR Gold Trust hit a record 1,134.03 tons as of June 1 from 1,104.09 on May 1, 2009, an increase of 29.94 tons in one month. Similarly, silver holdings of the iShares Silver Trust have risen to a whopping 260.36 tons as on June 1.
Gold prices advanced in Asian trade Wednesday mainly on a weak dollar that prompted investors to buy the yellow metal as a safe haven against inflation.
Spot gold climbed 0.4 percent to $984.45 per ounce at 10.30 a.m Singapore time from New York's notional close of $980.85 on Tuesday.
U.S. gold futures for August delivery GCQ9 edged up 0.2 percent to $986.10 per ounce from Tuesday's $984.40 settlement on the COMEX division of the New York Mercantile Exchange.
Hopes that the global economy may be on the road to recovery also buoyed demand for bullion. Gold is used in electric equipment and other products, and inflation can boost demand for the precious metal.
Bullion was also supported by the U.S. government's extra borrowing making the U.S. Treasury market vulnerable to falls, traders said, with the benchmark 10-year note yield reaching a six-month peak of 3.75 percent last week.
Investment experts said that gold and silver-back funds are the hottest properties these days because of the rise in global stock markets in the past few days.
“Several large global funds are buying gold and silver ETFs because of the recovery in stock markets. Gold and silver ETFs will continue to charge fund houses and investment banks,” Mark Robinson, a Dubai-based bullion analyst told Commodity Online.
He said stock market liquidity and rise in gold and crude price are helping the boom in gold and silver-exchange traded funds.
SPDR Gold Trust issues securities backed by physical stocks of gold.
iShares Silver Trust's silver and other assets are valued on the basis of each day's announced London Fix, the price for an ounce of silver set by three market making members of the London Bullion Market Association, minus all accrued fees, expenses and liabilities.
Investments in SPDR have played a large part in pulling the spot market higher with its holdings pausing from repeatedly hitting new highs when spot gold fell back after rising to an 11-month high above $1,000 on February 20.
SPDR holdings dipped for the first time in two months in March, preceding a fall in spot gold below $900 an ounce, underscoring a close correlation between the fund’s holdings and the market.
Gold prices have moved up and down on differing cues from stocks and currencies, but bullion’s safety appeal remains intact due to the grim outlook for the global economy and more countries possibly selling their own currencies as a way to fight deflation.
The plus point with gold ETFs now is that gold remains the most stable of the assets, and the ETFs offer the easiest access to gold investment. From an investor point of view, gold is currently the most attractive product.
Compared with a generally steady rise in gold prices, oil prices have undergone sharper swings in prices, a reflection of the difference in types of investors putting money in the market.
