Gold has become the story of 2016: Adrian Ash

Gold has become the story of 2016, in the beginning of the year it was hated but now it has become a big momentum trade, says Adrian Ash of BullionVault.

In an interview with CNBC-TV18, he said that gold at the moment is fundamentally associated with political risk, the Brexit referendum and US Presidential race should prove to provide safe haven appeal for gold.

He also feels that there is more room for gold to go higher this year.Below is the verbatim transcript of Adrian Ash’s interview to Manisha Gupta on CNBC-TV18. Q: This space really seems to be attracting a lot of money even as we have seen the risk appetite back and no actual safe haven buying today. The sector seems to be doing well nonetheless? A: You are exactly right. It has become a momentum trade for a lot of hedge funds, western money managers, gold has become the story of 2016. So, where you started with very low prices, gold was cheap, gold was hated at New Year. I can't remember of time since the lows of 2000-2001 when gold was out of favour with money managers as it was and it was a very contrarian, very anti-consensus play to look at gold as a position for early 2016. It has now become very much a big momentum trading and you can see that in exchange traded fund (ETF) holdings you can see that most particularly in US COMEX gold futures and options where speculative betting by hedge funds is all time record highs and new record highs every week. These guys were short gold at Christmas when gold was cheap and now have record long positions on gold at 2 and 3 year highs. Q: Would you say that much of the run up in gold has been done or do you think there is much steam left? A: It really depends on what now drives the story. Gold has become associated as I say, it is a big momentum play now for 2016. But it has also fundamentally become associated with political risk. So, obviously the Brexit referendum here in the UK the US presidential election in November we should expect to see a lot more of that safe haven speculation around gold as the campaigning unfolds in the states. So, I do think there is more room here for gold to go higher. What is interesting and what is important to note is that you have these record high speculatively positions, huge amount of money betting on gold prices going higher and yet we aren't at USD 1,380-1,400, we are at USD 1,350. What is holding the gold price back, three things. One, very weak demand from the big consumer centres such an India and China right now. Also a lot of selling by western retail investors. They have accumulated gold on lower prices since 2013 and certainly on BullionVault and I know amongst our competitors and friends in the industry more broadly people are seeing heavy selling of gold coin and bar by private households on these higher prices and thirdly there is mining producer hedging at these prices. Gold miners missed the opportunity to hedge and protect themselves against the crash of 2013. We have seen some high profile hedges come back on over the last 6-12 months particularly in Australia where the Australian dollar gold prices been setting new all time highs. So, this is what is actually helping to drag the price down a little bit at the moment compared to where it would be.