Gold-backed exchange-traded funds have taken a record-breaking amount of cash so far this year, as investors flock to gold during and after the coronavirus pandemic.
Nearly $33.7bn flowed into these ETFs investment vehicles that hold physical gold or gold futures, since the beginning of 2020, amounting to around 623 metric tons of the precious metal, up from a previous record of 591 metric tons recorded at the height of the financial crisis in 2009, according to data from the World Gold Council (WGC).
Meanwhile, gold ETFs holdings grew by 4.3% in May alone, pushing the volume to 3,510 metric tons held by these investment vehicles to date. Net capital inflows going to gold ETFs also spiked by a record high $195bn during the year.
Cash going into gold-backed ETFs have occurred before, during, and after the pandemic, as investors initially saw gold as a safe haven for the economic woes caused by the outbreak, but have been drawn to the precious metal even after the health emergency seems to be under control, potentially due to long-term economic uncertainties.
Gold prices have had a choppy week after posting a small 0.3% gain on Monday followed by two consecutive days of losses that sent the price below the 1,700 level, as investors moved on to riskier assets amid hopes of a swift economic recovery and an ongoing stock market rally.
Gold futures are up 1% in Friday’s early morning commodity trading activity, leveling at $1,712 amid a positive unemployment report from the US Bureau of labour, which revealed a joblessness rate of 13.3%, down from an expected rate of 19.5%.
Adam Perlaky, manager of investment research at the WGC, said: “Gold ETFs saw inflows on all but two trading days over the past two months, underscoring that investors are embracing gold in both risk-on and risk-off environments”.
He added: “As investors seek efficient and effective strategies to hedge ballooning budget deficits and high valuations for both stocks and bonds, collective holdings of gold ETFs exceed the official gold reserves of every country except for the U.S”.