Contrary to recent forecasts predicting the end of the gold bull market, Graham Tuckwell, chairman of ETF Securities, believes untapped demand from China and India and retail investors will lead to a second decade of growth for the gold market.
Ten years on since Tuckwell launched the world’s first physical gold exchange-traded product (ETP) in Australia, similar products are now listed on 31 exchanges throughout the world and have seen assets under management reach USD147bn .
ETF Securities has 13 different products that track the spot price of gold. In 2012 alone, investors allocated a total of USD2.5bn in net new assets into the firm’s physically-backed gold products. Furthermore, nearly 40 per cent of all European physical gold ETP flows were traded through ETF Securities’ products in Q4 2012.
Tuckwell says: “Ten years ago, you heard about gold, people talked and got emotional about it, but you couldn’t buy it readily. It is widely acknowledged that the launch of gold ETPs has had a very significant impact on the gold market and is now a key part of it. We have witnessed a decade of growth, and despite some predicting the end of the gold bull market, I think the next decade has a lot more to go.”
The resurgence of risk appetite amongst investors has led to many switching their money out of more defensive assets, such as gold and into equities. However, ETF Securities’ head of investment strategy, Nicholas Brooks, doesn’t believe the recent sell-off reflects a U-turn in investor attitudes and believes the overall outlook for gold remains good.
“Most of the current selling is by investors with shorter-term tactical views,” says Brooks. “However strategic investors in gold are continuing to hold tight. They see gold as a longer-term hedge against currency debasement, diversification and insurance against worst case economic scenarios, and some are starting to think about increasing allocations following the recent price declines.
“With net speculative longs in the futures market now back at end-2008 levels and the continued high risk of negative sovereign risk events in Europe, I wouldn’t be surprised to see a turn in gold ETP inflows in the coming weeks or months.”
