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Gold rally nears 6-year high

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The rally in gold is picking up fresh fuel from investors.

Two key data points suggest speculators are adding plenty of cash to the rally, which could drive prices even higher. Gold has now surpassed $1,400 an ounce, reaching an almost six-year high.

  • SPDR Gold Shares (GLD), the largest ETF backed by a commodity, attracted almost $1.6 billion on Friday, the most since its inception in 2004. GLD has a 0.40% expense ratio, according to Morningstar.
  • CFTC Positioning: Hedge funds and other large speculators boosted their net long positions in U.S. gold futures and options to the highest since February 2018.

“Gold bulls are back in control,” Edward Moya, senior market analyst at Oanda, said in a note, adding the metal remains supported by rising expectations of a 50 basis point cut at the Fed’s July meeting. “The question is no longer will the Fed ease, but by how much? The Fed historically likes to kick on an easing cycle with a bang and a 50 basis point cut should become the base case.”

The rally has been driven by signs that the Fed and other central banks are turning more dovish on monetary policy. Planned U.S. sanctions against Iran, as well as the coming meeting between the American and Chinese presidents, is also creating a raft of bullish factors for the precious metal.

Gold could end the year even higher, according to Russ Koesterich, a portfolio manager at the $27 billion BlackRock Global Allocation Fund (MALOX).

These expense ratios were closer to the average fund fee in 1996.
August 15

Spot gold climbed 0.6% to $1,407.76. Prices soared 4.3% last week, the biggest gain since April 2016. A gauge of the greenback was near a three-month low.

Recent U.S. dollar weakness and more speculative money moving into bullion are among the factors that suggest gold has more upside than downside, said Martin Lakos, division director at Macquarie Wealth Management. The bank forecasts $1,450 by the first or second quarter of next year, he said.

In other precious metals, silver, platinum and palladium all gained. — Additional reporting by Shery Ahn

Bloomberg News