Power of the golden tweet

Gold holdings 

Who knew tweeting could be so powerful?

The conciliatory Twitter-post attributed to Russian news agency RIA Novosti telling the world that Russia was interested in peace in the Ukraine and in de-escalating the conflict helped reverse U.S. stock futures by 12-points before the opening bell.

However, as investors consider the fact that it will take action from Premier Putin rather than words, the equity rally has already fizzled. And besides, the tense situation with Russia is but one of three focal points sitting on the geopolitical horizon. Overnight the World Health Organization elevated its position on the Ebola situation to crisis level. As the markets opened news of an American air strike on Islamic targets in Iraq also broke. Hardly a quiet summer for US investors and one in which bonds have been favored over stocks. 

Overnight the 10-year yield slid to 2.32% as demand for safe haven plays stepped up. Meanwhile, gold has failed to find the vigor typically associated with rising fear. Perhaps the following chart helps explain why. Gold is struggling to extend its rally and currently stands at $1310 per ounce (blue line). The orange line measures the total known holdings of gold by exchange traded funds. Despite the turmoil, there have been scant signs of incremental demand for the precious metal. At around 55-million ounces held by ETF managers in response to trading flows in gold-backed funds, the total remains close to its lowest point of the year. There is little evidence of accelerated buying as geopolitical tensions take center stage. When holdings of gold were previously this low in 2009, the ETF was trading at around $1,000 per ounce.          

Chart: Total known ETF holdings of gold

About the Author
Andrew Wilkinson

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.

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