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Gold-Backed ETF Holdings Climb Again in September on North American Demand

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After surging in August, gold continued to flow into ETFs last month, signaling continued strong demand for the yellow metal – specifically in North America.

According to the World Gold Council, gold-backed ETF holdings increased by 22.4 tons in September. This follows on the heels of a 31.4 ton increase in August.

With the price of gold surging in early September, the combined liquidity of gold ETFs rose sharply month-over-month to $1.51 billion per day, an increase of 20% versus the year-to-date average liquidity of $1.26 billion per day.

North American ETFs drove the increase with other regions seeing slight outflows. After taking in 27.8 tons of gold through funds listed in the region in August, North America upped her game in September with investors adding 35.0 tons. This more than compensated for European fund outflows of 12.0 tons. Asian funds also saw slight outflows of 1.7 tons. ETFs in other regions saw slight inflows.

Analysts say a weakening euro against the dollar last month helped drive the outflow in European markets. Nevertheless, European funds continue to lead inflows on the year. The European market accounts for close to 56% of all 2017 ETF gold inflows at 120 tons.

Global gold-backed ETFs collectively hold 2,357 tons of gold. Funds have added 191.9 tons of gold on the year, equivalent to $7.5 billion. This represents an increase of 7.7% of global AUM from December 2016.

Inflows of gold into ETFs are significant in their effect on the world gold market, pushing overall demand higher.

ETFs are backed by physical gold held by the issuer, and are traded on the market like stocks. They allow investors to play gold without having to buy full ounces of gold at spot price. Since their purchase is just a number in a computer, they can trade their investment into another stock or cash pretty much whenever they want, even multiple times in the same day. Many speculative investors appreciate this liquidity.

There are good reasons to invest in ETFs, but they aren’t a substitute for owning physical metal. In an overall investment strategy, SchiffGold recommends buying gold bullion first.

When considering gold-backed ETFs, you should always keep in mind that you don’t actually own the gold. Buying the most common ETFs does not entitle you to any actual amount of the precious metal.

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