Make Kitco Your Homepage

Gold investment demand hits new record in June -- WGC

Kitco News

Editor's Note: Get caught up in minutes with our speedy summary of today's must-read news stories and expert opinions that moved the precious metals and financial markets. Sign up here!

(Kitco News) - The data keeps providing more evidence of the unprecedented investment demand for gold-backed exchange traded funds (ETFs), according to the latest data from the World Gold Council (WGC).

In a report published Tuesday, the WGC said that gold ETFs saw their seventh straight month of inflows in June with gold holdings rising by 104 tons last month. The inflows have driven gold holdings to new all-time highs of 3,621 tons. The WCG added that assets under management have also rose to their highest level on record.

In the first half of 2020, gold ETFs saw inflows of $734 tons valued at 39.5 billion.

To put this strength of demand into context, H1 inflows are so significantly higher than the multi-decade record levels of central bank net purchases seen in 2018 and 2019 and could absorb a comparable amount of about 45% of global gold production in H1 2020,” the WGC said.

Analysts at WGC said that they don t expect investment demand to remain strong through the rest of the year.

The economic and geopolitical environment remains support for gold investment, with most of the existing gold demand drivers still relevant. The opportunity costs of holding gold remains low, as continued central bank activity keeps interest rates low or negative,” the analysts said. And there are serious concerns that the trajectory of the COVID-19 pandemic threatens any nascent economic recovery. Growing infection rates across some parts of the world, particularly in the U.S., suggest that there is some way to go before economies can reopen with confidence.”

Looking at a regional breakdown, the WGC said that North American demand dominated the ETF market, accounting for 80% of the inflows seen last month. North American based funds saw 83 tons of inflows in June; meanwhile, European based funds saw inflows of 18 tons. Asian funds grew by 0.4 tons in June.

However, ETF investment demand in the gold market is a stark contract to physical demand, especially from important gold-consuming nations like China and India. Analysts have noted that strict lockdown measures and high gold prices have brought demand down to unprecedented levels.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.