Gold’s record-breaking rally extended on Tuesday after reports that China is stepping up efforts to cement its influence in global bullion markets. Bloomberg revealed that the People’s Bank of China (PBOC) is seeking to act as a custodian of foreign sovereign reserves, encouraging allied nations to buy gold and store it within China. If successful, the move will strengthen Beijing’s role in the global financial system and advance its ambition to reduce reliance on the US dollar and traditional hubs such as the US, UK, and Switzerland. The initiative is well timed as demand for gold surges amid rising geopolitical risks, giving the PBOC an opening to position itself as a trusted haven for a vital shock-absorbing asset.
Sometimes the picture can become clearer when we stand back and look at the bigger timeframe, and in the case of gold, whether it be the underlying precious metal or VanEck Gold Miners ETF (GDX), we are in a strong bull market where surprises are likely to be with the trend, which is up. We’ve been looking for gold to consolidate after trading into the $US3,600 area, but this is already starting to look and feel wrong after it tested $US3,800 overnight; the market is stronger than we thought.
NB The GDX ETF tracks the Arca Gold Miners Index (AUD), delivering an international twist with 53% exposure to Canada, 18% US, 9% Australia and 7% South Africa at its core. The largest holding is Newmont Corp (NEM US) ~11% while the most significant local holding is Northern Star (NST), which is less than a 3% position.
- We are looking for optimum ways to again increase our gold exposure into Christmas.
We are bullish towards gold medium/long term
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