INFLOWS TO GOLD-BACKED EXCHANGE TRADED PRODUCTS SURGE
Dubai, United Arab Emirates, 24 August 2020:The coronavirus pandemic has caused a series of unprecedented events for the gold market, driving gold price performance relative to other asset classes.
Gold has traditionally been the ‘go to’ asset for safety because of its reputation as a stable store of value. As such, investors have been turning to gold as a safe haven against market volatility and negative economic effects caused by COVID-19.
Alessio Cirillo, Sales Director at Invesco EMEA, says “In terms of investment behavior, we have seen significant inflows into gold and gold products this year as investors are looking to protect their portfolio against slowing economic growth, market volatility, geopolitical risks and the risk of inflation. According to our analysis, gold ETPs listed in Europe alone raised more than $10bn of net new assets in 2020 to the end of July, with $1.4bn of inflows occurring during the final month alone.”
The price of gold recently passed $2000 an ounce for the first time, surpassing a major hurdle as real yields remain low and investor fear continues over the impact of coronavirus on global economies.
Amid this demand, growth in gold-backed exchange traded products such as exchange-traded certificates (ETC) has surged. ETCs are structured as a debt instrument that is secured against physical gold being held in a vault. ETCs provide investors with an efficient and liquid way to gain exposure to the performance of the gold price without having to buy and store the physical precious metal. The low cost of investing through ETCs and ease of access that it offers means this product is a good vehicle for adding gold to a portfolio as a long term strategic position.
There are many gold exchange-traded products (ETPs) available on the market, including several that are shariah compliant which appeal to investors in the Middle East. And given the increase in demand for gold performance, the number of gold-backed ETPs has grown. ETPs that are more attractive to investors are those that track very closely to the gold price, have high liquidity, allow ease of access to invest and sell, and offer a low cost advantage.
According to Cirillo “Higher gold prices have contributed to strong growth in underlying assets of the ETPs, allowing some managers to lower fees in order to stay competitive. Invesco, as one of the largest providers of exchange traded products, manages several active gold-backed ETCs in the market and has been able to share some of the economic and operational advantages of asset growth with investors through lowering fees.”