Gold's Hidden Potential: Even Modest Demand Uptick Could Send Prices Soaring
The gold market is massive, with global liquidity averaging $356 billion per day in July. But despite this significant activity, gold remains underinvested, particularly in the West.
Bloomberg reporter Jack Ryan notes that much of the daily trading activity reflects rapid-fire trading by banks and algorithmic funds rather than fresh investment competing for available metal.
Gold-backed ETFs are a convenient way for investors to play the gold market, but owning ETF shares is not the same as holding physical gold. In December, Goldman Sachs analysts found that gold ETFs accounted for just 0.17 percent of private U.S. portfolios.
A 0.1 percent increase in private gold holdings can cause a 1.4 percent bump in the gold price. With investors still underweight on gold, even a modest demand uptick could drive prices substantially higher.