Gold holds steady in today’s early going
Latent institutional interest in the metal could resurface any time, according to survey

(USAGOLD – 9/30/2021) – Gold held steady in today’s early going – up $3 at $1731. Silver is up 12¢ at $21.73. If you are looking for a reason why gold has had difficulty getting out of its own way of late, weak institutional demand as reflected in the reduction in gold ETF stockpiles is an excellent place to start. (Please see our Chart of the Day.) A recent Coalition Greenwich survey, though, reveals a solid latent interest among institutions that could resurface at any time.

“One of the primary goals of our study [on institutional involvement in the gold market],” says London-based market consultant, “was to see how investors are reacting to the unprecedented market environment created by the easing of the COVID-19 crisis, and to understand how emerging concerns like inflation and the need for tail-risk protection were affecting their views of gold. Our topline finding on that front is that institutional allocations to gold are expected to increase over the next three years. Currently, about 1 in 5 institutions have specific allocations to gold in their portfolios. Allocations are most common among institutions in EMEA** (29%) and among the world’s biggest institutions, or those with more than $10 billion in assets (27%). The average gold allocation for investors who own or include gold in their policy portfolio was 4%. Almost 40% of current gold investors expect to increase their allocations in the next three years, and about 40% of institutional investors who do not have gold exposure but have a target or have considered it, plan to make an investment in that time frame.”

*Please see: Rethink, Rebalance, Reset – Institutional Portfolio Strategies for the Post-Pandemic Period / Coaltion Greenwich / Andrew McCollum

**Europe, Middle East, and Africa

Chart of the Day

overlay line chart showing gold ETF holdings and gold price 2001 to present

Chart courtesy of • • • Click to enlarge

Chart note: Since the 2000s, there has been a strong relationship between growing gold ETF stockpiles and the price of gold. The reduction in holdings over the past nearly two years reflects declining interest on the part of institutional investors. Some analysts believe institution and fund participation in the gold market could turn quickly should inflation prove to be persistent or if some other economic and/or financial market uncertainty surfaces. If you are looking for a reason why gold is not performing up to snuff at this juncture, the reduction in ETF stockpiles and institutional interest is a good starting point.

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