Fund managers bought the most gold since October last year before the Fed announcement last week
By: Peter Cooper
Monday, 23 September 2013
The gold price has slipped back from the bounce that followed the Fed’s surprise decision not to wind down on QE money printing last week. And yet recent price weakness has anyhow been attracting some of the smartest investors back into the precious metal.
Money managers added $850 million to gold funds in the week ended September 18th, the most since last October, according to Massachusetts-based EPFR Global that tracks money flows. Total inflows for all commodity funds were $1.2 billion, the most since last November, leaving gold the stand out choice before the Fed announcement last week.
Seasonal price uplift
Why should fund managers be buying gold now? Party this is a matter of watching the seasonal price pattern. Gold tends to have most of its price gains of the year in the autumn months as Indian religious celebrations occur at this time and this is well known by professional buyers.
They are also great followers of commodity cycles and the gold correction that started in 2011 at $1,923 an ounce is looking long in the tooth. The 12-year bull market in gold is also actually not broken so there is no reason to think very much lower prices are in prospect, although a big sell-off in global financial markets this autumn would likely retest the recent lows.
Contrarians from Dr. Marc Faber to Charles Nenner have been advising the purchase of gold in this market dip while warning that global stock markets look very high and ripe for a correction. Sometimes fund managers do not behave like a herd of lemmings.