(Kitco News) - Central bank demand has been a key factor behind gold’s rally since late 2022, but the latest trade data show that investment demand is now the new momentum driver for the precious metal.
On Monday, CME Group announced that total volume across its metals complex reached a record 2,829,666 contracts on Friday. Volume surpassed the previous record of 2,148,990 contracts set less than two weeks earlier.
The record volume came as gold prices hit all-time highs near $4,400 an ounce before dropping sharply, ending Friday’s session with a 2% loss.
Looking at the precious metals sector, the CME noted that smaller contracts geared toward retail investors saw record volume last week. The exchange’s Micro Gold futures — one-tenth the size of a regular 100-ounce contract — saw one-day volume of 1,267,436 contracts. E-mini Gold futures, which are half the size of a regular contract, saw record volume of 12,818 contracts. CME’s new one-ounce Gold futures also recorded a record volume of 199,928 contracts and record open interest of 20,326 contracts.
"Demand for safe-haven assets is surging as market participants work to navigate ongoing economic uncertainty," said Jin Hennig, Managing Director and Global Head of Metals at CME Group. "Clients across the globe continue to turn to our Gold futures and options to hedge their risk and pursue opportunities in this complex environment, with both large institutions and retail traders driving record activity across our metals product suite."
Data from the World Gold Council show that 59.2 tonnes of gold flowed into global gold-backed exchange-traded funds — the biggest one-week increase since March 2020.
In a recent interview with Kitco News, Aakash Doshi, Head of Gold Strategy at State Street Investment Management, noted that even in the face of record demand, gold remains an underowned asset. State Street markets the world’s largest gold-backed ETF, SPDR Gold Shares (NYSE: GLD).
“In January, GLD was still seeing outflows. So, from that standpoint, despite the growth, gold is still not an overowned asset.”
In a recent note to Kitco News, Robert Minter, Director of ETF Strategy at abrdn, cited data showing that gold represents only 2.4% of total portfolio allocations.
“Assuming fund managers have only a 2.4% allocation to gold, and China’s gold, as a percentage of FX reserves, is 6.7% (compared to 77% for the U.S.), the fundamentals seem fully intact despite the price frenzy,” he said.
