Industry Updates

Gold ETF inflows reach six year high amid Brexit concerns

George Geddes

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The global gold demand grew to 1,123 tonnes at the end of Q2 2019, up 8% year-over-year. This added to Q1’s figure to make a total of 2,181t for the first six months of the year, a three-year high, according to the World Gold Council’s (WGC) latest quarterly report.

Some key drivers for this increase in demand include central banks buying a record amount of the yellow metal as well as gold-backed ETFs seeing inflows which were also the largest in six years.

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Central banks bought 224.4t of gold in Q2, bringing the total amount for the year to 374.1t which is the largest increase in gold reserves in WGC’s 19-year quarterly data set.

Gold ETF revenues remain supreme for issuers

Elsewhere, holdings in gold ETFs grew by 67.2t in the last quarter, bringing the total to 2,548t, the highest its been in six years. Investors seek haven in the commodity due to continued geopolitical stability such as Brexit and the expectation of lowered interest rates and rallying gold price in June.

Concerns regarding Brexit and who would become the next prime minister caused UK investors to flock to gold-backed funds. UK-domiciled ETFs accounted for nearly 75% of global inflows in Q2.

Assets in global gold-backed ETFs grew to $115.4bn, the highest since April 2013 as inflows reached 107.5t for H1.

As Europe's ETFs saw inflows for 87.2t of gold, US-based funds saw a modest 4.8t. A strong performing equity market meant investors sold off their gold exposures in April and May which meant June’s inflows resulted in the quarter to only just break even.

An increase in demand of gold jewellery caused the price of gold to rise over the quarter. A growing number of weddings, in particular India, caused a large spike in purchases of jewellery in the first two months of Q2.

Additionally, a slight fall in value back in Q1 encouraged a significantly large volume of buyers to purchase their gold jewellery for the auspicious day of Akshaya Tritiya in May.

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