Traders are betting on a further rally in gold, anticipating increased interest in a defensive asset against the background of the banking crisis unfolding in the US and Europe. About this with reference to market participants writes Financial Times.
Investors traditionally bet on changes in the price of the precious metal through futures contracts, exchange-traded funds (ETFs), or option contracts tied to the latter, the FT notes. Aakash Doshi, head of Citigroup’s North American commodities division, told the newspaper that there has been a surge in investor activity across all three channels in recent weeks.
The “big catalyst”, according to the top manager, was “stress in the regional banking system of the United States”, when California’s Silicon Valley Bank and New York’s Signature Bank collapsed within a few days. Against this background, the spot price of gold for the first time since the spring of 2022 exceeded $2,000 per ounce, approaching levels after the start of the Russian “special military operation”* in Ukraine.
The growing interest in futures and options indicates that investors are preparing for a continuation of the banking crisis and, as a result, a further rise in the price of gold. As a result, March could be the first month of net inflows into gold ETFs in over 10 months, with betting volume on options tied to these funds already approaching record levels, the FT writes.
Market participants also noted a marked increase in interest in the Chicago Mercantile Exchange gold futures and related options, including special non-profit options that will pay off only if the price of gold reaches new all-time highs, the newspaper said.
Interest in gold has been growing for more than a year. In 2022, the demand for the precious metal increased by 18%, to 4,741 tons, which was the highest value in the last 11 years, the FT wrote, citing data from the World Gold Council. This was facilitated, among other things, by the freezing of the assets of the Russian Central Bank in the West, which prompted other central banks to buy the precious metal to diversify their reserves.
*According to the requirement of Roskomnadzor, when preparing materials on a special operation in eastern Ukraine, all Russian media are required to use information only from official sources of the Russian Federation. We cannot publish materials in which the ongoing operation is called an “attack”, “invasion” or “declaration of war”, unless it is a direct quote (Article 57 of the Federal Law on the Media). In case of violation of the requirement, the media may be fined 5 million rubles, and the publication may also be blocked.