Gold continued to flow into ETFs after breaking a record in September. Gold-backed funds took in another 44.4 tons of metal in October, pushing global holdings to another record of 2,900 tons, according to the latest data by the World Gold Council.
The previous record for ETF gold holdings was set back in 2012 when the price of gold was near $1,700 per ounce.
Global ETF holdings have grown by 421 tons year-to-date, a 14.4% year-on-year increase.
European funds led October’s global flows, adding 31.3 tons of metal. UK-based funds accounted for two-thirds of European inflows as Brexit turmoil continued to drive safe-haven investing. European funds have grown consistently in 2019, seeing positive flows in every month except April. UK-based fund holdings continue to make all-time highs, reaching 600 tons. That represented 21% of global gold-backed ETF assets in October
North American funds added 13.2 tons of gold in October. A weaker dollar helped boost gold-buying. Strong inflows in North American-listed funds over the past five months have increased the region’s contribution to 2019 growth. As of the end of October, North American funds had added 229 tons of gold, contributing 54% of total global inflows.
Asian funds had slight outflows totaling 0.8 ton and other regions recorded inflows of 0.7 ton last month.
The price of gold was up 2.9% in October, bringing the total return of gold to 18% year-to-date. The price of gold was near all-time highs in every major G10 currency except for the US dollar and Swiss franc. According to the WGC, “The gold-price rally in October appeared to be a by-product of combined factors: the weaker US dollar, geopolitical uncertainty surrounding the preliminary US/China trade deal and the uncertainty of Brexit.”
Inflows of gold into ETFs are significant in their effect on the world gold market, pushing overall demand higher. Gold demand was up 3% in the third quarter of 2019. The World Gold Council listed inflows of metal into g0ld-backed funds as one of the factors driving demand higher.
ETFs are backed by physical gold held by the issuer and are traded on the market like stocks. They allow investors to play gold without having to buy full ounces of gold at spot price. Since their purchase is just a number in a computer, they can trade their investment into another stock or cash pretty much whenever they want, even multiple times on the same day. Many speculative investors appreciate this liquidity.
There are good reasons to invest in ETFs, but they aren’t a substitute for owning physical metal. In an overall investment strategy, SchiffGold recommends buying gold bullion first.
When considering gold-backed ETFs, you should always keep in mind that you don’t actually own the gold. Buying the most common ETFs does not entitle you to any actual amount of the precious metal.
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