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European gold ETFs hit record highs

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Gold ETFs have continued to soar with European-listed ETFs funds leading October gold ETF flows, adding 31.3 tonnes (USD1.2 billion, 1.9 per cent of AUM), or 70 per cent of net inflows, according to Juan Carlos Artigas (pictured), Director of Investment Research at the World Gold Council (WGC).

Gold ETFs have continued to soar with European-listed ETFs funds leading October gold ETF flows, adding 31.3 tonnes (USD1.2 billion, 1.9 per cent of AUM), or 70 per cent of net inflows, according to Juan Carlos Artigas (pictured), Director of Investment Research at the World Gold Council (WGC).

Two-thirds of European gold-backed ETF inflows came from UK-listed funds, as inflows persisted ahead of the 31 October Brexit deadline, while North American funds added 13.2 tonnes (USD585 million, 0.8 per cent) and Asian funds listed in Asia decreased by 0.8 tonnes (USD0.9 million, 0.02 per cent).

In particular, low-cost gold-backed ETFs in the US have seen positive flows for 16 of the past 17 months and have increased their collective holdings by 55 per cent so far this year, Artigas says.
 
There are more than 80 ETF funds the WGC tracks worldwide, which are physically backed by gold, with a few that have a small percentage of cash and other instruments.
 
Three main things lie behind the popularity of gold in ETFs, says Artigas.
 
“The first is in line with the drivers of gold investment – risk and uncertainty,” Artigas says. “Of course, this year we have had plenty of risks to worry about, including trade wars, Brexit in the UK and European economic concerns related to growth and debt. These are still issues that have yet to have been fully resolved.”
 
The opportunity cost of holding gold has also increased, Artigas says. “Interest rates are coming down as monetary policy has made a 180 degree turn from last year. Central banks were trying to normalise policy and now a large number are easing again with lower and even negative interest rates that also affect investments.”
 
Finally, the momentum in the price of gold itself has made headlines and increased interest from many investors, Artigas says, estimating that year to date gold backed ETFs have seen global inflows of approximately USD20 billion dollars.
 
“The majority is coming from the US but Europe is also an important source, and we even have had net inflows from some of the smaller funds in Asia,” he says. “One of the interesting things about gold is that is has a dual nature. On the consumer side, jewellery and tech demand increases as economies grow. On the investment side, many investors use it for diversification as a safe haven.”
 
He also comments that gold backed ETFs offer one way to access the market but looking at the demand for gold bars and coins, that makes up a larger portion of demand and activity.
 
“You have investors who access gold through a multiple of ways,” Artigas says. “If you look back 15 years ago, gold backed ETFs were new to the market and since then they have increased in numbers around the world as one of the structures that investors have found useful. The trend will continue as long as demand continues.”

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