Virus alarm drives rotation into gold with record ETF flows

[SINGAPORE] Global investors are stashing more and more assets into gold as the coronavirus outbreak spreads and appetite for risk takes a hit.

The global tally of bullion in exchange-traded funds (ETFs) swelled by the most in more than a month on Tuesday as equities sank. That was the 25th consecutive day of inflows, a record. At 2,624.7 tonnes, the holdings are the largest ever.

After surging 18 per cent last year, gold has extended its rally in 2020, with prices hitting the highest since 2013. The haven has been favoured as the virus outbreak has spread beyond China, threatening a pandemic and slower growth.

Goldman Sachs Group Inc has said that should the disruption from the disease stretch into the second quarter, prices may rally towards US$1,850 an ounce. Spot bullion was last at US$1,644.84.

A global recession is likely if the coronavirus becomes a pandemic, according to Moody's Analytics chief economist Mark Zandi. The odds of that outcome now stand at 40 per cent, up from 20 per cent, he said in a note.

The threat of a prolonged downturn in growth due to the impact of the virus may keep gold elevated, according to Morgan Stanley. Further ETF inflows are likely as long as real interest rates remain negative, it said in a note this week.

BLOOMBERG