Investors stampede into gold as top ETF swells most since 2016

[SINGAPORE] The biggest bullion-backed exchange-traded fund (ETF) is suddenly getting a lot of love. Holdings in SPDR Gold Shares surged by the most in almost three years as the US-China trade war, signs of a slowdown, and speculation the Federal Reserve will cut rates combined to fan demand.

Assets in the SPDR ETF jumped 16.44 tonnes, or 2.2 per cent, on Monday to post the biggest gain since July 2016, while a tally of holdings in all ETFs saw the biggest increase this year. The swing towards the traditional haven came as gold prices surged above US$1,300 an ounce to hit the highest since February.

St Louis Fed president James Bullard weighed in, saying a cut may be warranted soon. Markets are now discounting at least two quarter-point reductions by year-end - one more than just days ago. Billionaire Stan Druckenmiller said rates could go to zero in 18 months if the economy softens.

On Tuesday, there were more signs of weakness from across Asia as revised data showed South Korea's economy shrank 0.4 per cent in the first quarter, the worst performance since the financial crisis, while the purchasing managers index in trade-dependent Singapore dropped below 50.

"Gold is once again trying to reclaim its role as a safe haven amid growing trade tensions and consequent risks to growth," Joni Teves, a strategist at UBS Group AG, said in a note. The price "looks like it is getting comfortable above US$1,300, with aspirations of testing this year's highs," she said.

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