Gold ETFs Set a New Record Globally

Posted On Saturday, Oct 17, 2020

Gold rallied sharply by ~20% between April and July, reaching an all-time high in early August. When prices increase at such a lightning pace, there is often a phase of correction and consolidation, like the one we are currently in. The metal's prices have declined by ~8% over the last couple of months. But this pullback is likely tactical in nature. Because despite the weaker prices, investment demand via Gold ETFs has continued to increase.


As per the World Gold Council, global net inflows of 1,003 tons in 2020 have taken Gold ETF AUM to an all-time high of 3,880 tons or US$235 billion.

This tells us that even though Gold's popularity seems to have temporarily waned, its long-term strategic positioning is intact. And it should be. Reason being that absolutely nothing has changed about the macroeconomic drivers of Gold prices.


The Covid-19 pandemic is far from over. As a global recession rages on central banks have reacted by injecting liquidity into the system and purchasing assets. Interest rates globally continue to remain low while government debts and deficits continue to shoot up. With the threat of inflation looming large, currencies continue to be debased and geo-political tensions are rife.


Gold, because of its potential to store value over long time periods and its tendency to generally appreciate in times of negative interest rates or when there is a loss of confidence in the economy and monetary system, will thus continue to be a preferred asset.


In short, the cocktail of macroeconomic conditions continues to be conducive for Gold prices; and investment flows into the asset class are likely to continue well into the next year.


Whether we like it or not, till the world doesn't defeat the virus, normalcy and economic growth will continue to evade us. Even after a medical solution or vaccine is ready, it will not be able to undo the extraordinary economic damage caused by the pandemic overnight. As such, Gold investors would do well to have a long term perspective and ignore the short term gyrations in prices fueled by uncertainty in global markets.


If you haven't already allocated 10% to 15% of your investment portfolio to Gold, now is a good time. Investors who do not have a Demat account can invest in Quantum Gold Savings Fund which in turn invests in units of Quantum Gold Fund (ETF). If you have completed your allocation, just sit tight and watch Gold play a risk-reducing, return-enhancing role for your portfolio


Editor's note:To know more about investing in Gold funds (adding to your Gold investments) write to us at [email protected]
Or give us a missed call at +91-22-68293807 and we will call you back. We will be happy to assist you.


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