European gold investment boosted by debt and inflation

Purchases of gold-backed financial products (ETFs) rebounded in the third quarter, driven in particular by European investors and their concerns about inflation and the sustainability of public finances, according to the World Gold Council, an organization promoting and regulating the gold market. Globally, gold stocks linked to ETFs increased by 211 tonnes over the period, with “record inflows of $31 billion” (around 27.6 billion euros), specifies the Council's quarterly report published on Tuesday. “Europe has been the leader in terms of demand” for these financial products backed by the yellow metal, Krishan Gopaul, Council expert, told AFP.

The appeal of gold as a portfolio diversification tool has been heightened by persistent political uncertainty, growing fiscal concerns and increased volatility in local bond and equity markets, the report said. Investors from the Old Continent are particularly concerned about the economic situation in France, which saw its gross domestic product fall by 0.1% in the third quarter and the cost of its debt increase sharply. Six months before the presidential election, the French political situation is a significant source of concern.

The lack of a government majority coupled with high debt leaves little room for maneuver for the budget currently being discussed in the National Assembly. And “it’s not just what’s happening inside the continent, it’s also what’s happening with the United States, the Middle East, etc.,” adds Krishan Gopaul.

The conflict in the Middle East has sent oil and gas prices soaring and fueling inflation, particularly for European countries that remain dependent on hydrocarbon imports. Faced with an unstable geopolitical environment, the World Gold Council is cautious in its demand forecasts for the next quarter and beyond. “The midterm elections in the United States introduce an additional source of uncertainty”, and “an anticipated increase in Democratic control could be favorable for gold”, specifies the report.

If Democrats take control of the House and Senate, the United States could be plunged into a prolonged government shutdown next year, which would be bearish for the dollar and could benefit the yellow metal as a competing .

Machine-translated from French