The price of both gold and silver rose last week despite a spike in US bond yields and a stronger dollar, spurring on speculation that any tapering measures have largely been discounted into their prices.
Since bullion’s July low its price has now risen by 14 per cent, while silver, enjoying a 1.1 per cent gain last week, is now up by 27 per cent over the past eight weeks.
ETF Securities head of research and investment strategy Nicholas Brookssays: “While the surge in US bond yields is pressuring many financial assets, precious metals took the latest release of the Fed’s FOMC minutes in stride, ignoring the Fed’s statement that it is ’broadly comfortable’ with moving ahead with reductions in bond buying in the near future.
“The fact that both gold and silver prices ended the week higher indicates that the start of Fed tapering may have already been largely been priced in to precious metals prices.”
But the recent rebound in precious metals prices appears to have spurred on some profit-taking, with $77m flowing out of precious metals exchange traded products last week. However physical buyers, especially in Asia, are taking up the slack according to Brooks.
In the first half of 2013, UK exports of gold to Switzerland soared to 797 tonnes, equivalent to 30 per cent of global mine production, with much of the supply likely coming from ETFs liquidations. Hong Kong imports of gold from Switzerland surged to 284 tonnes over the same period, evidencing a shift in gold demand from the West to the East.
Adrian Lowcock, senior investment manager at Hargreaves Lansdown, says: ”Gold has a place in investor’s portfolios as it can provides an insurance policy and will protect investors over the long term effects of quantitative easing. But investors should be wary of short term performance as the gold price can be sensitive to political decisions.
”The recent volatility has caused claims of both a bear and now a bull market in 2013. This is not particularly constructive and highlights the need for investors to focus on the long term.”