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Gold Flows into ETFs for Ninth Straight Month

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Globally, gold-holding in ETFs increased for the ninth straight month in August with the appetite for gold notably increasing in Asian markets.

ETFs added a net 39 tons of gold last month, according to the latest data from the World Gold Council.

Year-to-date net inflows of gold into ETFs total of 938 tons valued at $51.2 billion. Inflows this year have boosted collective gold ETF holdings to an all-time high of 3,824 tons with assets under management of $241 billion. Year-to-date, gold ETF inflows have already surpassed the largest annual gain of 646 tons seen in 2009 by nearly 50%.

North American funds once again led the way in August, adding 41 tons of gold. All 16 funds listed in the North American region saw an increase in their gold holdings.

Asian funds saw a significant 7-ton increase. According to the WGC, investor appetite and the launch of two new Chinese funds helped drive the big increase in Asian holdings.

Funds in other regions, including Australia saw gold inflows of 1.9 tons.

For the first time since November 2019, European funds saw a net outflow. Gold-backed funds in the European region shed 11 tons of gold. Outflows from German ETFs drove the overall decrease. According to the WGC, a stronger euro along with improving investor sentiment in the region were factors in the shrinking holdings. The euro has appreciated 9% against the US dollar in the last four months.

The World Gold Council says the Federal Reserve’s higher inflation targeting policy could bode well for gold prices in the future.

Gold is seen as a well-established global inflation hedge, historically achieving stronger returns in higher inflationary markets. In the US, for example, since 1971, the nominal returns of gold with CPI levels below 3% have averaged nearly 6%, while returns in inflation environments above 3% have averaged 15%.”

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

There’s a difference between investing in gold-backed ETFs and physical gold. Learn more here.

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 on 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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