Gold continues to bide its time in run-up to the election; Hathaway calls record ETF gold flows ‘paltry’ compared to global assets under management

Gold continues to bide its time in run-up to the election; Hathaway calls record ETF gold flows ‘paltry’ compared to global assets under management by Michael J Kosares for USA Gold

Gold continues to bide its time in the run-up to the U.S. election with safe-haven demand acting as a positive influence and ongoing gridlock over the stimulus package acting as a deterrent. Overarching all, the pandemic seems to be reasserting itself in both the United States and Europe.  Gold is level on the day at $1911.  Silver is up13¢ at $24.48.

“In simple mathematical terms,” writes long-time gold market analyst John Hathaway in a study posted at Gold Eagle, “the gold market could not clear at current prices if 1% of the $100 trillion or so of institutional assets under management were to move into the physical metal. Record year-to-date inflows into gold-backed ETFs have exceeded any previous year. But in dollar terms, this amounts to a paltry $51.2 billion requiring the acquisition of 936.2 metric tonnes of gold (according to Meridian Macro Research). By contrast, a $1 trillion inflow into gold bullion would require 18,000-19,000 tonnes, equal to roughly six years of annual world gold production. A shift of this magnitude by asset allocators would require a bullion price of $5,000-$10,000 an ounce.”

(Editor’s note: Though it might be difficult to imagine gold trading at those levels anytime soon, the figure does graphically illustrate gold’s under-utilization as a financial asset. The $1 trillion figure Hathaway cites represents only 3% of the more than $35 trillion under management in global pension funds, for example. By way of a broader perspective, according to Toptal Finance, insurance funds globally have another $30 trillion in assets under management. Mutual funds house about $40 trillion and sovereign wealth funds about $7.5 trillion.)

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