Stick with gold is the dominant theme this year and likely to remain so for a while. Why not, if gold looks likely to head past $2,000 and over. Image Credit: Reuters

London: Investors are so concerned about the global outlook that worldwide holdings in gold-backed exchange-traded funds (ETF) now stand behind only the official US reserves of bullion after they surpassed Germany's holdings.

Gold has rallied to a record this year as the coronavirus pandemic savaged growth, with gains supported by massive inflows into bullion-backed ETFs. Bulls are fearful that the waves of stimulus to fight the slowdown may debase paper currencies and ignite inflation.

They also point to simmering geopolitical tensions, rising government debt burdens, and lofty equity valuations.

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Worldwide holdings in gold-backed ETFs rose to 3,365.6 tonnes on Monday, up 30.5 per cent this year, according to preliminary data compiled by Bloomberg. That's a couple of tonnes ahead of Germany's stash. US reserves exceed 8,000 tons.

Even after futures topped $2,000 an ounce, there are plenty of forecasts for further, substantial gains. Among them, Goldman Sachs Group Inc. says gold may climb to $2,300 as investors are "in search of a new reserve currency," while RBC Capital Markets puts the odds of a rally to $3,000 at 40 per cent.

On Tuesday, futures traded at $1,993.20 an ounce, just below the latest record of $2,009.50, which was set on Monday. ETFs enable investors to trade in gold without needing to take physical delivery of the precious metal.