The coronavirus spurred a flight to safety trades in the first quarter and that was impactful for gold ETFs, such a the SPDR Gold Shares (NYSEArca: GLD) and the SPDR Gold MiniShares (NYSEArca: GLDM).
As the coronavirus outbreak continues to be the wild card in the markets, the safe haven of precious metals is in high demand, especially for exchange-traded funds (ETFs) that are backed by gold. ETFs have been stockpiling gold as more coronavirus news continues to invade the financial markets.
New data from the World Gold Council (WGC) confirm that ETFs such as GLD and the low cost GLDM packed on the assets in the first three months of this year.
“Global gold-backed ETFs (gold ETFs) and similar products added 298 tonnes(t), or net inflows of US$23bn, across all regions in the first quarter of 2020 – the highest quarterly amount ever in absolute US dollar terms and the largest tonnage additions since 2016,” according to the WGC. “During the past year, gold ETFs added 659t, the highest on a rolling annual basis since the financial crisis, with assets under management (AUM) growing 57% over the same period.”
Going With Gold
With the Federal Reserve slashing interest rates to zero percent, cash might be king, but gold is certainly vying for that crown as a more suitable safe-haven asset. The effects of the coronavirus are no doubt weighing on the minds of investors. Likewise, the central bank responded in tow by bringing rates down to zilch and dumping an epic $700 billion worth into quantitative its easing program.
“Globally, gold ETFs added 151t – net inflows of US$8.1bn (+5%) – in March, boosting holdings to new all-time highs of 3,185t,” said the WGC.
Additionally, volume in gold ETFs, including the benchmark GLD, spiked in the first three months as the coronavirus stoked elevated equity market volatility.
“Trading volumes and AUM reached record highs as gold volatility increased to levels last seen during the financial crisis, yet gold price-performance was mostly flat in US dollars for the month,” according to the WBC. “Gold prices denominated in many other currencies, however, continued to reach all-time highs although the price in US dollars remained 15% below its 2011 high.”
Important to the gold case is that it’s not just U.S. investors embracing bullion ETFs.
“Uncertainty around the short- and long-term economic impacts of COVID-19 continues to drive sharp volatility across many assets, leaving global equities in a bear market territory while encouraging inflows into safe-havens like US treasuries and gold. Against this backdrop, gold ETFs listed in all regions experienced strong inflows during the month,” notes the WGC.
For more alternative investing ideas, visit our Alternatives Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
