European gold-backed ETPs reach all-time high

News Arnulf Hinkel, financial journalist – 25.04.2019

According to the World Gold Council, assets under management (AuM) in gold-backed European exchange-traded products (ETPs) reached 1,121.4 tons at the end of Q1 2019 – the highest since the introduction of this asset class in 2003. In Europe, the term ETPs refers primarily to exchange-traded funds (ETFs) and exchange-traded commodities (ETCs). The current share of European gold ETPs, which now accounts for 45 per cent of global assets managed in gold ETPs, makes for another record. Less than three years ago, in June 2016, this share was at just under 35 per cent.

Financial crisis served as driver of demand for gold-backed ETPs

In the first years following their introduction, until the beginning of 2007, gold-backed ETFs and ETCs in Europe amounted to slightly more than 100 tons of gold. But with the financial crisis taking shape, the "golden" era of physically-backed gold ETPs was jump-started: by early 2009, gold-based AuM already amounted to 400 tons. And the popularity of this emerging asset class did not abate when the acute phase of the financial crisis was over; by the end of 2012, AuM in gold ETPs peaked just shy of 1,000 tons. Within six years, AuM had grown by more than eight times.

AUM in gold ETPs doubled since 2016

At the beginning of 2013, markets and investors had calmed down again. At the same time, the price of gold came off its highs. This led to massive outflows from physically-backed gold ETPs, while investments in riskier and more profitable assets increased. This changed again in 2016, when German and British gold ETPs, in particular, experienced inflows of 281 tons of gold. Since 2016, AuM in European gold-backed ETPs have grown almost as rapidly as during the financial crisis. Among the reasons for this, the World Gold Council cites continuing geopolitical uncertainties in the EU, the still volatile financial markets, and the fact that the European Central Bank has very little scope to abandon its zero interest rate policy in the foreseeable future.

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