by Peter Schiff, Schiff Gold:
Holdings in global gold-backed ETFs surged in June, charting their largest increase in seven years driven by increased geopolitical uncertainty, fear of an economic slowdown and widespread anticipation of looser central bank monetary policy.
Globally, gold holdings in ETFs rose sharply by 127 tons last month, according to the latest data from the World Gold Council.
Inflows into ETFs globally totaled about $5.5 billion last month.
Global assets under management in gold-backed ETFs rose 15% to $115 billion. That’s the largest monthly increase since 2012.
The dollar increase was partly due to the flow of new metal into funds and it was boosted by the 9% rally in gold prices last month. According to the WGC, “Gold is one of the strongest performing asset classes in 2019, and reached all-time highs in a handful of currencies, most notably the Australian dollar.:
Gold flowed into ETFs in every region of the world in June.
Funds in North America led the way, adding 65 tons of gold. According to the WGC, low-cost gold-backed ETF assets rose to all-time highs of 53 tons (US$2.4 billion), representing 85% growth over the past year.
We believe the strong asset growth in not only larger, more liquid funds, but also low-cost funds, highlights increased holdings by both tactical and strategic investors.”
SPDR Gold Shares added 51 tons of gold, experiencing its largest, one-day inflows of all time on June 21.
European-based ETFs brought in 59 tons of the yellow metal. UK-based funds represented three out of the top five funds globally in terms of inflows. Uncertainty about Brexit continues to drive gold investment demand in the United Kingdom.
Asian based funds saw more modest inflows of 2.4 tons.
Gold-backed ETFs grew by 4.3% as a percentage of gold during the first half of 2019, despite outflows of metal in February, April and early May. European funds represented 78% of global year-to-date inflows, growing 7.3% in H1 2019.
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.