With the precious metals sector receiving significant attention, gold ETFs have recently been hitting their 52-week highs. Global investors have increased their positions in gold exchange traded funds pushing the year to date flows into all gold focused ETFs into positive territory. ETFs are a good representation of what retail clients are thinking in the gold space being the main vehicles used to allocate their savings to gold, away from physical purchases. Primary drivers of gold demand include global central banks, long-term investors, including those buying gold bars and coins and ETFs like GLD, and industrial users. However, short-term speculators remain important in driving gold prices. From the charts below, we can see that there has been a significant spike in gold flows over the last three months. It is relatively unusual to see the quantity of current inflows that we are seeing in gold, occurring at a time when stocks have been rising as well.
Gold has rallied for the past two months due to continued uncertainties around trade, the USD, Iran and U.S. politics. It is a time when economic reports covering May and June were by and large lower, and even GDP forecasts using Fed-models were slowing down to sub-2% growth.
We believe gold has moved into a new range, and while much of the recent monetary policy shift was priced in very quickly, we believe asset allocation flows will continue to offer near-term support. With a trend towards central-bank de-dollarisation accelerating and ongoing annuity demand from ETF flows, we are certainly in a precious-positive environment, and one which should be supportive of gold pricing and gold equities, particularly as the gold price in many producer currencies looks extremely strong. Notably, the chart below shows the relationship between the nominal share position in the largest ETF, the GLD and the gold price. As we have commented last month, the gold price is substantially higher relative to the size of GLD positions compared to the last few years. We would argue this is a strong positive for the gold price going forward as despite the spikes in retail interest, positions have been much larger before on a strong gold price and should see continued buying and price rises to accompany that.
While many ETFs ‘claim’ to be physically backed by real gold, none has been tested in a crisis scenario. Investors, most probably have that added risk, many of whom are not even aware of how these products are structured. For those retail clients wanting to take exposure to the gold market, Glint offers assurance in its ability to any individual to access, buy and hold real physical gold across the wealth spectrum at whatever size. Chose Glint and protect your wealth today.
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