Gold ETFs See Impressive Inflows Amid Coronavirus Crisis
Gold-backed ETFs have witnessed record inflows so far in 2020 as the coronavirus pandemic and geopolitical tensions are creating demand for safe-haven assets like gold. Going by new data released by World Gold Council, gold-backed ETFs witnessed the eighth consecutive month of positive flows in July and added 166 tonnes equivalent to around $9.7 billion or 4.1% of assets under management. Notably, global AUM in gold ETFs was $239 billion at the end of July, according to the report.
Contribution in around 75% of global net inflows in July came from North American funds which added $7.0 billion or 5.5% of AUM. Commenting on the record inflows, Adam Perlaky, Manager, Investment Research, at World Gold Council, has said that "geopolitical and macroeconomic conditions suggest that strong gold investment demand and price performance will be more of a marathon than a sprint and will likely go the distance in H2 2020,” per the report.
Will Gold Continue to Glitter?
The yellow metal continues to outperform other major asset classes this year as concerns regarding the impact of the pandemic on the global economy have investors scurrying for safe-haven assets. Yellow metal prices have once again hit a new high, steering past $2,000 an ounce.
The upside is being largely supported by a weaker dollar and declining bond yields. The yellow metal shares an inverse relationship with the greenback. A weak dollar against different currencies makes precious metal cheaper in other currencies and thereby, increases its demand and prices. Meanwhile, rising geopolitical tensions are supporting the yellow metal. The simmering tensions between the United States and China are making investors worrisome.
In this regard, Adam Perlaky, Manager, Investment Research, at World Gold Council, has said that "looking ahead, though the shape of the recovery remains uncertain, we expect ongoing global economic uncertainty and low real rates to continue bolstering gold investment demand for the remainder of 2020," per the report.
Also, some analysts believe the Federal Reserve’s measures to provide support to the ailing economy seem to be supportive of investments in gold and treasuries. Moreover, interest-rate cuts are lowering the opportunity costs of investing in non-yielding bullion. Uncertainty surrounding the coronavirus pandemic over the longer term is making the yellow metal’s reputation as a store of wealth more attractive, in turn supporting the rally in gold prices, per a Bloomberg article.
Also, analysts at Bank of America expect the precious metal to hit $3,000 an ounce over the next 18 months (per an article published on foxbusiness.com). Going by the same article, commenting on the rising gold prices, they have said that “the global pandemic is providing a sustained boost to gold due to increased savings, growing inequality, vast capital destruction, declining productivity, rising public debt levels, and, most importantly, falling equilibrium real interest rates.”
Gold ETFs in Focus
Yellow metal investments have been popular this year due to the coronavirus outbreak. Notably, the global stash of gold in ETFs touched the highest level in seven years in the middle of the first quarter of 2020. Net inflows in gold-backed ETFs are expected to continue as the second half of 2020 is likely to keep facing the brunt of the pandemic with the second wave of the outbreak gathering steam.
Gold ETFs mostly move in tandem with gold prices. The SPDR Gold Shares GLD, iShares Gold Trust IAU, SPDR Gold MiniShares Trust GLDM and GraniteShares Gold Trust BAR are some of the popular ETFs. These funds carry a Zacks ETF Rank #3 (Hold). Below we have discussed these in detail:
GLD
This is the largest and most popular ETF in the gold space, with AUM of $82.93 billion and average daily volume of 14.4 million shares. The fund reflects the performance of the price of gold bullion, less the Trust's expenses. At launch, each share of this ETF represented about 1/10th of an ounce of gold. The expense ratio is 0.40% (read: Which Gold ETF is Better, GLD or GDX?).
IAU
This ETF offers exposure to the day-to-day movement of the price of gold bullion. It has AUM of $32.75 billion and trades in a solid volume of 27.8 million shares a day, on average. At launch, each share of this ETF represented about 1/100th of an ounce of gold. The ETF charges 25 basis points (bps) in annual fees (read: ETF Strategies for August as Coronavirus Outbreak Worsens).
GLDM
This product seeks to reflect the performance of the price of gold bullion, less GLDM’s expenses. Being one of the low-cost products with an expense ratio of 0.18%, GLDM has accumulated $3.59 billion in AUM and trades in average daily volume of 2.9 million shares. At launch, each share of this ETF represented about 1/100th of an ounce of gold (read: How to Bet on the Gold Frenzy With ETFs & Stocks).
BAR
With AUM of $1.37 billion and an expense ratio of 0.17%, the fund tracks the performance of gold price less trust expenses. It trades in a moderate volume of 535,000 shares per day, on average. At launch, each share of this ETF represented about 1/100th of an ounce of gold (see: all the Precious Metal ETFs here).
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SPDR Gold Shares (GLD): ETF Research Reports
iShares Gold Trust (IAU): ETF Research Reports
GraniteShares Gold Trust (BAR): ETF Research Reports
SPDR Gold MiniShares Trust (GLDM): ETF Research Reports
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