Gold-backed ETFs and ETPs on six-year high

2019 established itself as a “gold year” early on: at the end of Q1 2019, the World Gold Council reported a record level of 1,121.4 tonnes of gold in European gold-backed ETPs (exchange-traded products). In Q2 2019, the gold holdings of European ETPs grew continuously to 1,184 tonnes. In the third quarter, US gold ETF investors seem to be taking the lead again.

Gold ETFs and ETPs see highest inflows since 2013

According to recent data published by Bloomberg L.P. and the World Gold Council in early September 2019, the gold price in US dollars reached its highest level in six years at the end of August, as did inflows into gold-backed ETPs. For three consecutive months, gold ETFs and ETPs recorded net inflows, and in August, those of US-based gold ETFs reached 77.9 tonnes, more than doubling European inflows, which amounted to 33.4 tonnes. Together with total inflows of 10.9 tonnes in Asia and other regions, global gold holdings in ETFs and ETPs increased by 122.3 tonnes – the highest net inflows since September 2013.

Gold shines as safe investment in current market environment

In addition to the current geopolitical tensions and uncertainties, one circumstance in particular is responsible for the recent success of gold: the central banks’ policies of low or negative interest rates. With the threat of punitive interest rates for savers (which institutional investors are already all too familiar with), European private investors have realised that a safe alternative to gold in the form of fixed-income investments no longer exists – at least until the ECB abandons its loose monetary policy. This, however, is not to be expected in the medium term, as the future head of the ECB, Christine Lagarde, made unmistakably clear during her appearance in the European Parliament on 4 September 2019. Until this central bank policy is changed, the fact that gold does not provide any yield becomes less of a disadvantage.