Gold-backed ETF inflows reach seven-year high

Equity and bond ETFs saw significant inflows in June, but that did not stop investors maintaining a defensive stance as global gold-backed ETFs had $5.5bn in inflows over the same period.

According to World Gold Council’s 2019 June Fund Flows report, geopolitical uncertainty and central banks signalling a shift to a more accommodative policy over the coming months has caused investors to adopt gold ETCs.

The global assets under management in gold-backed ETFs grew 15% to $115bn, the largest monthly increase since 2012. The US was the largest driver for this growth with North American funds pulling in $2.9bn as a result of the 9% gold price rally.

Gold ETFs in Europe brought in $2.5bn with three of the five most popular ETFs in terms of inflows were based in the UK. Uncertainty around Brexit has resulted in UK-based holdings to be at an all time high. Elsewhere, assets in Asian ETFs grew by $107m.

So far this year, gold-backed ETFs have suffered heavy outflows in February, April and early May but asset growth year-to-date remains positive at 4.3%. Majority of H1 2019 global inflows came from European funds, representing 78% of new cash.

The ETFS Physical Swiss Gold ETC received $1bn worth of inflows in June, alone, more than doubling its AUM.

With the UK-based funds being some of the most attractive products in Europe following political uncertainty and a weakening pound, this trend is likely to continue as the currency continues to fall in the early weeks of July. The GBP/USD exchange rate has fallen to a two-year low as a no-deal Brexit looms and a slowing economy is forecasted.

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