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ETF Securities’ gold ETC holdings rise to all-time high

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As the gold price broke through the USD1,000 per ounce level last Friday, ETF Securities saw the assets in its physically-backed gold ETCs rise to a new all time high of 7.03 million ou

As the gold price broke through the USD1,000 per ounce level last Friday, ETF Securities saw the assets in its physically-backed gold ETCs rise to a new all time high of 7.03 million ounces.

This is up 33 per cent since 21 November and 65 per cent higher than the year ago level of 4.23 million ounces.

Trading volumes in gold ETCs have soared, with the combined monthly trading volume of ETFS Physical Gold and Gold Bullion Securities rising to USD2.2bn over the past month, up from an average of USD296m last year.

The gold price has increased by 40 per cent in USD, 46 per cent in GBP and 37 per cent in EUR since hitting a recent low on 11 November 2008.

ETF Securities says the key factor driving gold’s strong performance has been rising demand from the public for a hedge against financial instability, counterparty risk and concerns about the future purchasing power of major currencies, as government fiscal deficits soar and central banks aggressively expand the money supply.

World Gold Council statistics show that investor demand for gold jumped to USD21.4bn in 2Q 2008, up 150 per cent from the same period the previous year and the highest level on record.

Physically backed exchange-traded commodities and exchange-traded funds have played an important role in facilitating this investment, accounting for over 38 per cent of all identifiable investor flows in 3Q 2008.

‘The strong demand for physical gold such as ETCs is not surprising given the macroeconomic situation today,’ says Nicholas Brooks, head of research and investment strategy at ETF Securities.

‘Assets in ETFS Physical Gold and Gold Bullion Securities have increased by USD2bn since the beginning of the year, now standing at USD7bn, making them some of the largest and most traded ETFs in Europe. With financial instability high, counterparty risk a serious issue, governments boosting money supply at an unprecedented rate, and government debt levels expected to grow rapidly over the next few years, there are good reasons for conservative investors and the general public to want to hold a portion of their assets in gold.

‘Since early November the gold price has surged 40 per cent in dollar terms (46 per cent in sterling) and momentum has accelerated recently as concerns about government debt and the cost of financial sector bailouts has continued to rise and major central banks have moved towards quantitative easing.’

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