Record ETFs Inflows Signal Return of Investment Demand for Gold

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Gold investments in the form of ETFs have reached a new record in 2019 on the back of rising gold prices, and this trend signals an increase in interest from investors in both the institutional and retail level, this according to Juan Carlos Artigas, director of investment research at the World Gold Council.

“Many investors, institutional and retail investors are buying gold through gold-backed ETFs. Gold-backed ETFs last year reached record highs in terms of the amount of gold held. So, it’s no longer just a U.S. or North American phenomenon. Now, actually, European-listed ETFs hold almost as much as North American ones,” Artigas told Kitco News.

Central banks have turned from net sellers of gold into net buyers over the last ten years, and a lot of this has to do with governments’ changing appetite for risk, Artigas said.

“Central banks also cite safety and diversification in reasons why they invest in gold, and in some sense, gold is an asset that can protect their reserves over the long term,” he said.

Retail demand for physical gold saw a decline in 2019 while investment demand for gold ETFs rose.

“Consumer demand was generally softer but was offset by strong inflows in ETFs,” Artigas said.

He added that gold has multi-faceted investment purposes that sometimes may conflict with one another, as in the case of 2019 when gold prices rose.

“One of the really interesting aspects about gold is the dual nature that co-exists. You have a consumer side that is linked to jewelry, technology, but there’s also the investment side, and oftentimes, these two parts of gold are not necessarily moving in the same direction. Oftentimes, they may go in opposite directions,” he said.

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