Gold proves popular hedge against Europe risks

Gold exchange-traded certificates (ETCs) have seen nearly $900 million of inflows in the last few months, as investors have hedged against the risk of the European sovereign debt crisis. ETF Securities, a provider of gold and precious metal ETCs, said with Spanish and Italian bond yields approaching unsustainable levels, investors are seeking shelter in physically-backed ETCs. Another factor, it said, is the expectation that the slowing US economy will cause the Federal Reserve to push ahead with another round of quantitative easing.

A spokesman for ETF Securities commented: “European officials are running out of time to find a solution to ease the debt crisis. Investors appear to be building their gold positions to hedge against continued government failure to find solutions.” He added that investors hope European leaders will move towards fiscal integration, a broader and more aggressive plan to backstop the European banking system, and measures to revive the economy. There were also modest inflows into silver ETCs, as the silver price dropped. ETF Securities commented: “It appears some investors are taking the recent sharp silver price decline as an opportunity to build long positions.”