Industry Updates

Battle for gold ETC flows continues in Europe

Tom Eckett

a close-up of a gold bars

Investors continued to pile into gold exchange-traded commodities (ETCs) last week in a sign there are still concerns about the long-term impact of the coronavirus.

According to data from Ultumus, the iShares Physical Gold ETC (SGLN) saw $676m inflows in the week to 29 May, the most across all European-listed ETPs.

Close behind SGLN was the Invesco Physical Gold ETC (SGLD) which saw the third-highest inflows of the week with $273m while the Xtrackers Physical Gold ETC EUR (XAD5) took in $91m.

Gold ETCs have seen huge inflows this year as investors reacted to the rapid spread of coronavirus in the late Q1.

SGLN and SGLD, Europe’s two largest gold ETCs, both crossed the $10bn assets under management (AUM) barrier in mid-April following combined inflows of $3.2bn in March alone.

As a result of the big inflows, a price war has also developed with ETF issuers looking to offer investors the cheapest exposure to the precious metal.

This was started by Invesco, which slashed its fees to 0.19% matching BlackRock’s SGLN, before Amundi went one step further just weeks later with a four basis point cut taking its Physical Gold ETC (GOLD) to 0.15%.

Since launch in May 2019, GOLD has already gathered $2.8bn inflows highlighting the popularity of the asset class.

Commerzbank analyst Carsten Fritsch said the reason for the huge flows seen into gold ETPs was due to the quantitative easing actions by the Federal Reserve and the European Central Bank.

Fritsch noted: “The ongoing inflows into gold ETFs are evidence that investors distrust this unprecedented money-printing orgy by the two leading central banks.”

Why investors are flocking to gold ETFs

The Fed’s balance sheet has rapidly expanded 70% to $7.1trn since the end of February following the central bank’s promise of “unlimited” quantitative easing measures to prop up the US economy amid the coronavirus turmoil.

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