ETFs globally added another 166 tons of gold in July. It was the eighth straight month of inflows of metal into gold-backed funds. That pushed total ETF gold holdings to another record high of 3,785 tons, according to the latest data from the World Gold Council.
With gold hitting an all-time record high at the end of the month, global assets under management stood at $239 billion at the close of July.
So far this year, gold-backed funds have taken in 899 tons of gold. Over the first six months of 2020 global gold ETF holdings increased by 31% in tonnage terms.
North American funds led the way in July, with gold inflows of 118 tons. SPDR Gold Shares and iShares Gold Trust represented 61% of all global inflows in last month.
European funds increased holdings by 40 tons.
Funds listed in Asia saw holdings rise by 4.9.
Funds in other regions including Australia increased gold holdings by 3.4 tons.
According to the World Gold Council, gold investment is supporting demand even as the economic turmoil caused by government shutdowns in response to coronavirus has dampened demand in physical metal, specifically jewelry.
Investment demand and momentum appear to be more than offsetting the shortfall driven by economic weakness. With the recent demand shift, only 32% of demand came from jewelry, bar and coin, and technology in Q2 2020, with the remainder coming from investments – like gold ETFs – and central banks.”
The WGC also noted that unprecedented monetary stimulus could drive gold higher in the future.
Record stimuli and easy money by central banks appear to have driven investments in equities higher, despite weak economic indicators. Ultimately, it could be the behavior of central banks – with their continued expansionary monetary policy – that drives gold higher. This impact played a key role in prompting the multi-year bull market in the price of gold following the Great Financial Crisis and subsequent Quantitative Easing.”
Inflows of gold into ETFs are significant in their effect on the world gold market, pushing overall 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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