ETF flows increasing

The run higher in gold looks set to stay in the near term for the following reasons.

1. Strong seasonals in play. See chart below:

Bloomberg

2. Gold etf flows start to rise again after bottomming out.

Gold spot

Holding in SPDR gold shares, which is the largest bullion backed etf, grew by 17.2 tons on Monday. That is the biggest amount of inflow since September. Remember that the last run higher in gold was fuelled by rising etf levels even as physical demand weakened due to COVID-19 lockdowns. So, gold looks set for higher prices based on the rising etf flows.

Post the last FOMC meeting I initiated some gold longs in anticipation of the good seasonals in gold ahead for the Chinese Lunar New Year. However, one area of concern I was keeping my eye on was the golf etf flows. After the positive vaccine news in November we saw some etf selling off. This seems to have now reversed.

3. All eyes will be on the FOMC tonight. If the FOMC minutes show a unified consensus for providing more easing then that should encourage further USD weakness and more gold gains by proxy.

4. The Georgia run off is also a risk for further gold gains as rising 10 year yields could add strength to the dollar today. However, the USD is weakening while the 10 year yields are looking like breaking out higher. See Justin's post here.