The second quarter of 2020 will go down as one of the best in several years for gold and bullion-backed ETFs, such as the SPDR Gold Shares (NYSEArca: GLD) and the SPDR Gold MiniShares Trust (NYSEArca: GLDM).
Gold certainly had its run during the uncertainty of the Covid-19 pandemic, but as more economies around the world look to return to normal, the precious metal could lose its luster for the rest of 2020. That, however, could pose a buying opportunity for investors looking for gold exposure.
“Bullion is headed for its best quarter in four years as the number of confirmed covid-19 cases now exceed 10 million worldwide, with the spread of disease accelerating in major markets like the US, Brazil and India,” reports Mining.com. “Emerging covid-19 clusters around the world also indicate that the pandemic is far from over, aiding outlook for safe haven assets like gold.”
Golden Days for Gold ETFs
Since its launch on June 25, 2018, the SPDR Gold MiniShares Trust is now the third-largest physically-backed gold ETF in the United States. GLDM technically reached its number three spot in less than 2 years on March 18, 2020, and it attracted over $1 billion in net inflows year-to-date.
GLDM and GLD have captured $14.3 billion of the $20 billion, or 70%, of year-to-date flows into the U.S. physically-backed gold ETFs.
“So far this year, price of the yellow metal has gained 17% amid the unlimited quantitative easing led by the Federal Reserve to rejuvenate the economy. Investors have feverishly piled into gold-backed exchange-traded funds (ETFs), with global holdings continuously reaching new highs,” according to Mining.com.
The sudden rise of GLDM has not detracted from the ongoing popularity of GLD as a gold trading tool. In the three years before GLDM’s launch, GLD attracted 53% of net flows while other U.S. gold-backed ETFs brought in 47% of inflows. After GLDM’s launch, GLD attracted 57% of net inflows, compared to 7% for GLDM and 36% for other U.S. gold-backed ETFs.
“The macro backdrop continues to favor precious exposure: falling real rates, worldwide adoption of the rate cut cycle by central banks and, of course, universal anxiety about the virus,” according to Macquarie Group.
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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.