by Peter Schiff, Schiff Gold:
Total holdings of gold in gold-backed ETFs grew for the fourth straight month in January.
Globally, ETFs added 72 tons of the yellow metal to their holdings last month, according to the latest data released by the World Gold Council. This brought the total amount of gold held by funds worldwide to 2,513 tons valued at about $107 billion.
Total holdings have not been this high since March 2013. At that time, the price of gold was 22% higher. Global gold-backed ETF holdings have grown 6% over the past two months alone. According to the WGC, market uncertainty and a shift in sentiment that pushed the price of gold up by 3.5% in January alone were primarily responsible for driving the increase.
Total holdings in global gold-backed ETFs finished $100.6 billion in 2018, the first time they have eclipsed the $100 billion mark since 2012.
January flows were positive in every region with North America leading the way.
Gold flowed out of North American funds for most of 2018, with the total falling by 13.4 tons on the year. But the trend began to turn around in the fourth quarter as the US stock market sold off. Gold continued to flow into North American funds in January with the addition of 53 tons.
Holdings in European funds grew by 20 tons last month. According to the WGC, Brexit uncertainty was a primary driver of investment demand in the UK and Europe.
Asian funds basically held steady, adding 0.1 tons last month.
The movement of gold into ETFs over the last 3 years reversed a 3-year trend of outflows between 2013 and 2015.
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.