Gold ETFs Soar In Popularity As Money Flows Into Security

Soaring gold prices highlight more than just macromarket uncertainty and the drive to relative safety in the form of physical assets, it also mirrors the rising popularity of exchange traded funds.

Not everyone has a local bullion dealer or a vault at home for secure storage, and, even OTC derivatives can be OTT for many retail investors.

Exchange traded funds, however, are an accessible way to play the gold market.

Moreover, ETFs have never been more popular for gold investors - so much so that one ETF, SPDR Gold Shares (NYSEARCA:GLD), is now one of the biggest gold owners in the world.

GLD owns some 1,258 tonnes of gold, with bullion held in HSBC’s vaults in London, which is more than is held by many central banks.

It is more than is held by the Japanese and Indian central banks and equates to a third of what the US holds in Fort Knox. It has US$289bn of assets and generates around US$275mln to State Street, which facilitates the ETF alongside partner the World Gold Council.

Whilst it is the largest, there are many other gold ETFs on both sides of the Atlantic. And as gold prices continue to rise it is unlikely that their popularity will wane anytime soon.

Standing at US$2,047 an ounce gold was up around 1.2% for Wednesday. For context, in the last month, it is up some 12.7% and over a six month period is up US$457 an ounce or 29%.

“Gold moving over US$2k an oz is big news,” said Hector McNeil, HANetf chief executive.

“Given the uncertain times economically and politically, its clear gold is doing its job as an insurance asset.

“Many market commentators are predicting further rises in the price of gold, with Bank of America Merrill Lynch (BAML) anticipating it will reach US$3k an ounce by early 2022, which seems achievable given the real economic friction is still to come once the true impact COVID-19 on the World’s economy becomes clearer.”

HANetf manages the Royal Mints Physical Gold ETC which this week saw its value under management exceed US$350mln as the price of gold advanced above US$2,000.

McNeil described the ETCs growth as remarkable given that it listed in February.

“This truly shows investors not only want the safe haven of gold but also want to have the surety it's held in custody with a custodian with unparalleled history and that sits outside the financial system as opposed to a bank vault," he added.

HANetf highlights that the Royal Mint Physical Gold product is unique among others on the market.

Its gold bars are sourced from the London Bullion Market Association Responsible Gold Sourcing Program to avoid conflict free bars and that the gold is held in custody by The Royal Mint - not a commercial bank.