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Gold Up, Europe Lockdowns and U.S. Election Uncertainty Prompt Flight to Safety

Published 10/29/2020, 12:29 AM
Updated 10/29/2020, 12:30 AM
© Reuters.

By Gina Lee

Investing.com – Gold was up on Thursday morning in Asia, after coming close to a one-month low during the previous session, as the second wave of COVID-19 led to the announcement of fresh lockdowns in Europe and a weak dollar.

Gold futures edged up 0.20% to $1,882.9 by 12:26 AM ET (4:26 AM GMT), falling below the $1,900 mark. The dollar inched down and stocks, which usually move inversely to gold, were down on Thursday.

France and Germany are the latest countries to reintroduce lockdowns, with French President Emmanuel Macron and German Chancellor Angela Merkel announcing the measures on Wednesday. Investors are now looking to the European Central Bank (ECB)’s monetary policy decision, to be handed down later in the day, for clues to further stimulus measures. ECB is not likely to unveil new measures in this decision but is likely to start preparations to act in December.

In Asia, the Bank of Japan (BOJ) kept its interest unchanged at –0.10% when it handed down its own monetary policy decision earlier in the day. BOJ’s massive stimulus program also saw no changes, and the central bank pledged to take further action should the COVID-19-induced economic turmoil threaten a return to deflation.

The uncertainty over the Nov. 3 presidential election in the U.S., now less than a week away, also saw investors turning to the safe-haven yellow metal. Meanwhile, holdings in SPDR Gold Trust (P:GLD) fell 0.67% to 1,258.25 tonnes on Wednesday.

Latest comments

Even on the subject of GLD's insurance, they are not at all straightforward about it. Their representatives will not confirm nor deny the existence of GLD's insurance. I recommend anyone curious about this to confirm via calling GLD's publicly listed number for general inquiries at 866 320 4053 and ask about this clause from the GLD prospectus: "The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody." Exactly how much of the fund is insured? They will not give you a straight answer and might even throw in some bizarre excuse which I've experienced. Why hide this information from investors? The people behind GLD certainly do not seem like the most honest types.
"1,258.25 tonnes" Gina Lee, would you be able to provide any verifiable evidence to support your gold holding claim here? How reliable are GLD's holding reports? GLD does not give retail investors the right to redeem for any of its mystery physical gold holdings. This fact alone ensures the GLD shares to be nothing more than paper at the end of the day. GLD also has a glaring audit loophole in their prospectus that states they have no right to audit subcustodial gold holdings. To this day, I have not heard of a single good reason for the existence of this backdoor to the fund.  I remember there was a highly publicized visit by CNBC's Bob Pisani to GLD's gold vault. This visit was organized by GLD's management to prove the existence of GLD's gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on the most recent bar list at that time. It was later discovered that this "GLD" bar was actually owned by ETF Securities.
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