The gold price has hit an all-time high in Euro and the British Pound as the debt crisis in Greece and concerns about a hung parliament in the UK weigh on the Euro and Pound, and demand for gold as an alternative currency continues to rise.
The gold price surged to EUR862oz, up 12 per cent year-to-date and 30 per cent over the past 12 months (11 per cent and 24 per cent in British Pounds), highlighting gold’s increasing use as a hedge not just against US dollar weakness, but sovereign risks more broadly.
Investment demand for gold has soared since the outbreak of the financial crisis in the second half of 2008. Total annual gold investment more than doubled in 2009 to USD55bn from USD25bn in 2008 according to GFMS data.
Physically-backed gold ETFs have been the primary vehicle for gold investment, with investment in physically-backed gold ETF holdings rising 85 per cent in 2009 to account for 34 per cent of all gold investment last year.
Last year investments in gold ETFs surpassed coin and bar investing for the first time since the first physically-backed gold ETF, Gold Bullion Securities, was listed in 2003 by the founders of ETF Securities. Physically backed gold ETFs are estimated to hold approximately USD63bn worth of gold at the end of 2009, according to World Gold Council data.
ETF Securities has been a major beneficiary of this trend with total gold assets under management rising above USD8.7bn by the end of 1Q 2010, the largest gold ETF holdings in Europe and a 64 per cent increase over end 2008 levels.
Physically-backed platinum and palladium ETFs have also seen strong demand with assets under management in ETF Securities’ European, US, Japan and Australia listed platinum and palladium ETFs rising to USD1.6bn by the end of 1Q 2010, up 80 per cent since the beginning of 2010 and over nine times end 2008 levels.
ETF Securities total assets under management now stand at USD17.5bn, with assets spread across ETFs tracking precious metals, energy, agriculture and industrial metal commodity returns.
Nicholas Brooks, head of research and investment strategy, says: “The strong performance of gold, despite the strength of the US dollar, indicates that investors’ are increasingly viewing it as an alternative store of value, not just to the US dollar, but to fiat currencies more broadly, as sovereign risks continues to rise. The gold price has now hit new all-time highs in Euro and British Pounds and stands less than five per cent below its all-time high in US dollars. Traditionally, investors concerned about the structural outlook for the US dollar would buy Euros, British Pounds or Yen. However, with policy and debt risks rising in all of these countries, investors – as well as central banks and sovereign wealth funds – are increasingly looking to gold as an alternative ‘hard asset’ store of value.”