Debt Fears to Drive Gold in 2013

January 8, 2013 at 11:11


Ongoing concerns over sovereign debt levels in western markets will continue to support investment in gold in 2013, according to ETF Securities.

Nicholas Brooks, head of research and investment strategy at ETF Securities, said sovereign debt concerns were “at the head” of the bull market in gold and sustained demand for gold exchange-traded products (ETPs).

“I don’t see that situation changing significantly as these structural issues will continue,” he added.

Investment in gold ETPs in 2012 accounted for 83 per cent of the total $29.1bn (£18.1bn) inflows into all ETPs last year. The gold price rose 2.3 per cent during 2012 and yesterday (January 7) was trading at $1,645.

Silver was the second most popular sector for ETP investment last year, with $2.7bn in new money coming into silver-backed products. The price of silver rose 3.5 per cent in 2012.

Diversified commodity ETPs saw inflows of roughly $1bn, while crude oil ETPs saw $0.6bn in new money during the year, in spite of a 1.7 per cent fall in the price of Brent crude oil during the year.

The biggest outflows were recorded by diversified agriculture products, which saw $0.6bn in outflows during 2012. Mr Brooks said the most likely explanation for this was that grain and corn prices were high relative to historical levels, but pointed out that many other factors could make the sector more attractive in the coming months.