Gold Holdings in Gold-Backed ETFs Hit All-Time High in January
ETF gold holding reached another record high in January, according to the latest data from the World Gold Council.
Gold-backed funds added 61.7 tons of gold last month, boosting holdings to an all-time high of 2,947 tons. This continues a trend we saw in 2019 when gold holdings in ETFs grew 19% and eclipsed all-time highs.
With the price of gold increasing by nearly 5% in dollar terms in January, ETF assets under management grew by 8%. Total AUM is now less than 2% away from the all-time highs of 2012 when the price of gold was 11% higher.
European funds saw the greatest growth, adding 33 tons of the yellow metal in January. British funds led the way as investors continue to flock to gold as a safe-haven hedge in the midst of Brexit. UK-based funds continue to gain regional and global market share, now representing 44% of European assets and 21% of global assets
North American funds reported inflows of 29 tons. Low-cost gold-backed ETFs in the US have seen positive flows for 19 of the past 20 months and have increased their collective holdings by 220%
Asian funds were basically flat, with a slight outflow of 1.2 tons. Funds in other regions, including Australia, saw modest inflows of 0.7 ton.
According to the WGC, gold ranked as one of the best performing asset classes in January (+4.6%). The yellow metal outpaced global equity markets and commodities as a whole. Worries about demand in China put a significant drag on oil prices. This drove the overall Bloomberg Commodity Index down by 7%. The WGC called this “a clear example of gold’s ability to separate itself from the broader commodity complex.
A World Gold Council year-end report said the primary drivers for gold will likely remain in place in 2020, including Federal Reserve intervention in the repo markets and what is in effect quantitative easing, continued trade tensions between the US and China, and surprisingly low yields in speculative corporate debt.
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 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.