Gold exchange-traded commodities returns have risen after the gold price hit a record high of EUR882 or GBP764 per ounce on the back of Greece’s bond downgrade.
ETF Securities’ physical gold ETCs have traded over USD300m this week.
Gold has returned 15 per cent in EUR and 12 per cent in GBP this year, outshining local equities markets by around 12 percentage points (versus the Stoxx Europe 600) and eight percentage points (versus the FTSE 100).
Despite the US dollar strengthening by 2.5 per cent since 4 February 2010, the USD gold price has risen by over nine per cent during the same period and is now hovering just four per cent below its all time high in USD.
Inflows into ETF Securities’ physical gold ETCs have surged 36 per cent over the past 12 months, with its physical gold holdings standing at over 8 million ounces or more than USD9bn.
Martin Arnold, senior analyst at ETF Securities, says: "The recent downgrades of Greece, Portugal and Spain have highlighted the stark disparity of the growth profiles between the Southern and Northern Eurozone economies. The magnitude of the debt repayments that are scheduled for roll-over by Greece are not large, but the moves in gold suggest investors appear more concerned about the structural cohesion and the potential for contagion to spread within Eurozone.
“As a result, investors are looking to hold hard assets such as physical gold ETCs to protect themselves from the threat of currency depreciation with physical gold ETCs trading over USD300m already this week. With the Euro and GBP declining as sovereign default fears escalate, gold priced in these currencies have reached record highs and even in US dollars gold is only around four per cent below the record highs seen last December. In the current uncertain environment, ETFS’ gold ETCs have been an efficient way to capture the upswing in the gold price."