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World Gold Council Does Not Expect Reddit Frenzy To Spill Into Gold

Wed, 3rd Feb 2021 16:31

(Alliance News) - The World Gold Council does not expect the Reddit-fuelled frenzy to spill over into gold after retail investors recently targeted silver, which hit an eight-year high early this week before plunging on Tuesday.

Gold market is more liquid and much bigger than silver, with around USD150 billion traded daily, John Reade, the chief market strategist at World Gold Council, said at the annual mining indaba in South Africa on Wednesday.

The World Gold Council is a non-profit association of the world's leading gold producers.

Investors have recently organised on Reddit forums to target shares of companies such as the video games retailer GameStop Corp that had been short-sold by hedge funds, which have bet that the price of the company would fall.

On Tuesday, silver plummeted 10% as the Reddit retail investors after the CME Group, the Chicago-based futures exchange operator, raised margin requirements on silver futures by 18% on Monday, effective from Wednesday.

Shares in GameStop dropped by 60% in New York on Tuesday, closing at USD90.00, having spiked as high as USD347.51 on Wednesday last week.

Reddit have targeted companies such as AMC Entertainment Holdings Inc, American Airlines Group Inc, BlackBerry Ltd, Nokia Corp and Blockbuster.

Reade expects investors to drive gold this year as they did last year, noting that the yellow metal had a great year in 2020 - surging 25%.

Many factors that drove gold in 2020 will be there in 2021, and these include uncertainty and risks arising from new Covid-19 variants detected in South Africa, the UK and Brazil, which have made people concerned about the trajectory of global economic recovery.

"We are likely to see investors move into gold," World Gold Council's chief market strategist said.

Investors seek the safety of gold in times of uncertainty, offering protection of value of investments, diversification or hedging.

Last year, though, central banks bought less gold while jewellery demand fell sharply, Reade said.

By Artwell Dlamini; artwelldlamini@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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