The gold backed ETFs showed record breaking inflows in 2020, peaking at an all-time high of 3785 tonnes in July in total holdings, devaluing the value of global assets under management standing at $239 billion. This number was ahead of Germany’s stash by only a couple of tons while US reserves exceeded 8,000 tons.
Global net inflows of 899 tonnes ($49.1 billion) in the year to July are considerably higher than the previous record annual totals and the trend of inflows has continued in the first few trading days of August as the price of gold has breached $2000/oz.
To put these flows and holdings in perspective:
- ETFs now hold more gold than any one central bank barring the US Treasury.
- Inflows in 2020 have exceeded the record annual purchases by central banks seen in 2019 of 667t.
- ETF inflows in the first six months of the year were equivalent to about 40% of new mine supply.
ETF Inflows of last 20 years
There are two principal reasons why ETFs have seen such strong purchases in 2020, both connected to the corona virus.
- As the global economy tipped into deep recession, falling bond yields – especially negative real US Treasuries’ yields – have driven gold prices higher, encouraging investors to buy gold, sometimes via ETFs.
- The logistical issues that triggered the dislocation of the COMEX gold futures market from the OTC market centered in London have reduced the attraction of investment on the COMEX futures market, due to increased costs of ownership and higher premiums to the OTC price.
The bullion king of India as well as analysts and investors are so concerned about the global outlook that worldwide holdings in gold-backed exchange-traded funds now stand behind only the official U.S. reserves of bullion after they surpassed Germany’s holdings.