New data from the World Gold Council (WGC) confirm that investors continued piling into gold ETFs, such as the SPDR Gold Shares (NYSEArca: GLD) and the SPDR Gold MiniShares (NYSEArca: GLDM), last month, setting new asset-gathering records.
Gold bullion has been a traditional safe-guard of wealth and purchasing power in times of high inflation, and the loose monetary policies should devalue the currency. Lower interest rates are helping gold’s cause, too. Depressed interest rates diminish the opportunity cost of holding non-yield-generating assets, like gold.
“The strong investment demand for gold is not surprising as gold has repeatedly proven itself as an effective hedge during complex and challenging market conditions, including the global financial crisis and the current COVID-19 pandemic, said WGC Head of Research Juan Carlos Artigas in a note out Thursday. “Gold has outperformed most major asset classes and is up 11% year-to-date – we expect this trend to continue as investors navigate the ongoing market and social uncertainty and the impact of central bank intervention.”
Golden Data
Already one of this year’s top asset-gathering ETFs, GLD saw robust inflows last month as did other bullion-backed ETFs.
“Globally, gold-backed ETFs (gold ETFs) added 170 tonnes(t) – net inflows of US$9.3bn (+5.1%) – in April, boosting holdings to a new all-time high of 3,355t,” according to the WGC. “Assets under management (AUM) also reached a new record high of US$184bn as gold in US dollars moved higher by 5.8%. Inflows have been strong and consistent in recent months, but not unprecedented.”
While the coronavirus pandemic upended markets and fueled volatility investors turned to gold bullion and gold-backed ETFs to weather the storm. Data indicate North American and Chinese investors were big bullion backers last month.
“Uncertainty surrounding the economic and social impact of COVID-19, along with significant central bank intervention, continued to drive inflows into gold. Gold ETFs listed in all regions experienced inflows during the month, with inflows being particularly strong in North America, where flows have often been more correlated with gold’s price behavior,” according to the WGC. “North American funds added 144t (US$7.8bn, 8.3% AUM), while European funds added 20t (US$1.1bn, 1.4%). Asian funds – primarily in China – also finished the month with relatively strong inflows, adding 2.9t (US$206mn, 3.9%), and funds in other regions grew 5.8%, adding 3.3t and US$172mn.”
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