Gold ETFs Hit 4,250 Tonnes Amid Record Real Yields
Global gold funds grew to a record 4,250 tonnes even as US bond yields hit post-2008 highs.
Key points
- Global gold ETFs expanded to 4,250 tonnes last week, marking a new all-time record.
- The correlation between gold fund size and US real yields turned positive at +0.72.
- Fidelity Investments estimates gold's fair value at $5,000 based on US money supply models.
Gold exchange-traded funds reached 4,250 tonnes last week, a new all-time high. This occurred despite US real bond yields hitting their highest level since November 2008.
London bullion prices fell below $4,300 per troy ounce on Wednesday. This drop followed crude oil regaining the $100 mark and rising government borrowing costs in the West.
Historical Correlation Breaks Down
The SPDR Gold Trust shows a +0.72 correlation with real yields over 13 weeks. This is the strongest positive link seen since early 2022.
Historically, this relationship has been negative, typically reading minus 0.34 over the past 20 years. Gold usually shrinks when real US bond yields rise.
Saxo Bank describes this as a notable disconnect from historical norms. Demand now defies the traditional inverse relationship with rising interest rates.
Central Banks Drive New Demand
Alliance Bernstein argues that central banks are diversifying reserves away from the US Dollar. They are moving assets into gold, which supports prices despite higher yields.
Fidelity Investments says gold has become a pure play on global liquidity. Their model places the fair value of gold at $5,000 per ounce.
Market Context and Risks
US unemployment remained below 4.5% in August, extending a historic streak. This data supported the Federal Reserve's decision to raise rates last week.
Silver, platinum, and palladium also fell to one-week lows on Wednesday. Silver traded at $64.38, platinum at $1,749, and palladium at $1,257.
