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Gold-Backed ETF Holdings Surge in August Signaling Strong Demand for Gold

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Gold flowed into gold-backed exchange-traded funds in August, signalling robust demand for the yellow metal.

According to the World Gold Council, gold-backed ETF holdings increase by 31.4 tons in August to 2,295 in total global gold holdings.

Gold ETFs account for a significant part of the gold market. ETF holdings are on par with the foreign reserve gold holdings of France and Italy.

North America led inflows in August. Investors added 27.8 tons of gold through funds listed in the region. That represents a dollar increase of $1.3 billion.

Funds based in Europe also saw a net increase, taking in 6.4 tons, or $322 million last month. Asian funds saw a net decrease of 2.4 tons.

The combined liquidity of gold ETFs rose month-over- month to $1.23 billion per day, near its annual average of $1.22 billion per day.

Gold-backed ETFs have added 143.5 tons on the year. That’s about $5.3 billion. This represents an increase of 5.5% of global assets under management.

Despite recent resurgence in North American demand last month, European funds continue to lead inflows, up by 131 tons ($4.8 billion) accounting for nearly 79% of all inflows worldwide on the year. North America inflows come in at 22 tons so far in 2017.

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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