ETF Gold Holdings Approaching All-Time Highs

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Includes: AAAU, AGQ, BAR, CEF, DBP, DBS, DGL, DGLD, DGP, DGZ, DSLV, DZZ, GLD, GLDI, GLDM, GLDW, GLL, GLTR, IAU, IAUF, JJP, OUNZ, PALL, PGM, PHYS, PLTM, PPLT, PSLV, PTM, QGLDX, SGOL, SHNY, SIVR, SLV, SLVO, SPPP, UBG, UGL, UGLD, USLV, USV, ZSL
by: SchiffGold
Summary

Gold-backed ETFs added another 122 tons of gold globally in August and total holdings are nearing all-time highs.

European-listed funds brought in 33 tons of gold last month.

Germany auctioned the first-ever 30-year negative nominal-yielding bond.

By SchiffGold

Gold-backed ETFs added another 122 tons of gold globally in August and total holdings are nearing all-time highs.

Total told ETF gold holdings have reached 2,733 tons. That’s just 52 tons away from the all-time high reached in 2012 when the price of gold was 9% higher, according to the most recent data released by the World Gold Council.

Over the last three months, ETFs globally have increased gold holdings by 13%.

Funds in every region saw net increases in gold holdings in August.

North America funds led August’s flows, adding 78 tons. The region has now surpassed Europe with the biggest increase in gold holdings this year.

European-listed funds brought in 33 tons of gold last month. Funds based in the UK led the way as the pound continued to weaken and uncertainty swirled around Brexit. Germany auctioned the first-ever 30-year negative nominal-yielding bond. According to the WGC, this highlights the impact that low interest rates are having on the price of gold, improving its opportunity cost of holding as its price in euros reached all-time highs.

Funds in Asia reversed year-to-date outflows, adding 9 tons of gold in August. Chinese funds led the way. According to the WGC, average daily gold trading volume on the Shanghai Futures Exchange (SHFE) increased to over US$20 billion. That was well above the year-to-date average of $8 billion and the 2018 average of $3 billion.

Gold is now at all-time highs in every major G10 currency except the US dollar and Swiss franc, and it’s nearly at an all-time high in Chinese yuan.

Globally, gold-backed funds have added a net 292 tons of gold this year. This despite outflows of metal in February, April and early May.

Inflows of gold into ETFs are significant in their effect on the world gold market, pushing overall demand higher. Gold demand was up 8% through the first half of 2019. The World Gold Council listed inflows of metal into gold-backed funds as one of the factors driving demand higher.

ETFs are backed by physical gold held by the issuer and are traded on the market like stocks. They allow investors to play gold without having to buy full ounces of gold at spot price. Since their purchase is just a number in a computer, they can trade their investment into another stock or cash pretty much whenever they want, even multiple times on the same day. Many speculative investors appreciate this liquidity.

There are good reasons to invest in ETFs, but they aren’t a substitute for owning physical metal. In an overall investment strategy, SchiffGold recommends buying gold bullion first.

When considering gold-backed ETFs, you should always keep in mind that you don’t actually own the gold. Buying the most common ETFs does not entitle you to any actual amount of the precious metal.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.