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Investors continue to pile into gold ETFs, boosting price in July - WGC

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(Kitco News) Gold ETFs are a key part of total gold demand this year with investors continuing to pile in as prices are not done rallying yet, the World Gold Council (WGC) said in a report. 

July saw this year’s eighth consecutive month of inflows into gold-backed ETFs with investors adding a total of 166 metric tons in July, equivalent to $9.7 billion or 4.1% of assets under management (AUM), the report said last week. 

“Global holdings have once again reached a new all-time high of 3,785t and the price of gold hit a record high of US$1,976/oz by the July-end, leaving global AUM standing at $239bn. Global net inflows of 899t (US$49.1bn) to date are considerably higher than previous annual highs, and the trend of inflows has continued in the first few trading days of August as the price of gold has breached US$2,000/oz,” the report noted. 

North American funds led the pack with 118 tons of gold added, which accounted for 75% of global net inflows in July. European-listed funds added 40 tons and Asian-listed fund rose by 4.9 tons.

Gold-backed ETFs now represented about 21% of total gold demand in 2020, according to the WGC. 

Gold’s safe-haven appeal is driving investor funds into ETFs this summer and the WGC sees more price gains ahead for the yellow metal. 

“While the price of gold reached all-time highs in nominal terms, it remains below the inflation-adjusted record, which is US$2,800 or 42% higher,” the council said. Short-term pauses or consolidation periods are not being ruled out either. 

Economic uncertainty and real rates near or at all-time lows will continue to support gold in the long-term. 

“Investment demand and momentum appear to be more than offsetting the shortfall driven by economic weakness. With the recent demand shift, only 32% of demand came from jewellery, bar and coin and technology in Q2 2020, with the remainder coming from investments – like gold ETFs – and central banks,” the report added.

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