Since the start of 2016, assets in European gold-backed exchange-traded products (ETPs) have grown rapidly, hitting a record high of 1 121.4 t ($48-billion) in the first quarter of this year, the World Gold Council (WGC) reported on Wednesday.
Since their emergence in 2003, gold-backed ETPs have “transformed” the European gold investment market, the WGC noted, adding that, at the end of 2012, when the gold price hit a record high around €1 400/oz, assets under management (AUM) were just shy of 1 000 t (about $50-billion).
Having dipped between 2012 and 2015, in-line with lower gold prices, inflows into European gold-backed ETPs surged by a yearly record of 281 t in 2016.
“The value-eroding negative yield environment, as well as a spate of political worries, not least around Brexit, underpinned the flight to gold,” the council explained.
The positive momentum has persisted with significant inflows of 149.7 t and 96.8 t recorded in 2017 and 2018, respectively.
AUM in European gold-backed ETPs grew to 2 440.9 t by the end of 2018, hitting multiple record highs in the process. They now account for 45% of global AUM.
The WGC attributed the surge in demand to three broad factors, namely, loose monetary policy and negative yields, geopolitical uncertainty and lagging financial market performance.
It explained that consistently weak European equity market performance combined with monetary policies that have adversely impacted on the global and European economies, as well as political uncertainty across the continent, have pushed investors’ toward gold-backed ETPs.
“Looking ahead, it’s likely these factors will underpin demand in 2019 and beyond.”