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Peter Davis

An writer at FOMOdrive

  • Aug 28, 2023
  • 2 min read

Gold: ETF assets hit new lows since the start of the COVID-19 pandemic

Since the crisis in March 2020, the assets of Gold ETFs have reached their lowest levels.

The declining interest in the precious metal is occurring as US government bond yields reach multi-year highs.

UBS, a Swiss bank, has revised its prediction for gold prices by the end of this year downwards.

At the end of last week, Bloomberg reported that the assets of exchange-traded funds (ETFs) investing in gold had reached a low of 2.8 thousand tons, the lowest since the end of March 2020. This marks the twelfth consecutive week of decline, with a total decrease of over 120 tons.

The FxPro analyst team has observed that a sharp decrease in gold prices started a month ago, with the bears hindering the price from staying above the significant resistance level of $1980 since May.

FxPro is closely monitoring the situation as the yield of government bonds of developed countries rises and inflation decreases, creating a difficult environment for gold to remain competitive in terms of profitability. This is an important factor to consider when looking at the pressure on gold.

The yield on ten-year US Treasury bonds (UST) last week rose to 4.33%, the highest it has been since 2008. This means that a risk-free asset has become more profitable than non-revenue-producing gold and stocks.

FxPro suggests that China's attempts to protect its own exchange rate from depreciation have resulted in the sale of US government bonds and gold, which has caused an increase in their yield.

UBS, a Swiss bank, has decreased its prediction for gold prices at the end of 2020 by 7%, from $2100 to $1950 per ounce. However, the bank still believes that gold will reach a record high in 2021, predicting that it will be at $2100 by the end of June and $2200 by the end of September 2024.

UBS has revised its forecast, now expecting the Federal Reserve to begin reducing interest rates in the second quarter of 2024, rather than the end of 2023 as previously predicted. This shift should allow the US economy to make a gentle descent and avoid a mild recession.

The FxPro analyst team notes that gold has fallen below the 200-day moving average, an important indicator of the long-term trend, and appears to be targeting $1,800. This is a level that gold has received support or, conversely, finally surrendered at many times over the past three years.

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