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New Report From Invesco Finds Record USD15.4bn In Gold Purchased By Exchange Traded Products In Q1 2020

Date 24/06/2020

A record USD15.4 billion in gold was purchased by exchange traded funds and similar products in Q1 2020 globally, equivalent to 298 tonnes, according to a new market report from Invesco. The volume highlights the depth of the coronavirus-led market shift towards ‘safe haven’ assets and the central role that exchange-traded products (ETPs) have played in supporting investors at this key time.

The finding comes from the inaugural Invesco Gold Report, the first in a new series of quarterly reports on the gold market. While 341 tonnes of gold were purchased by ETPs in Q1 2016, the high price of gold in the first quarter of this year meant the overall value was the highest on record.

According to the study, demand for gold via ETPs increased by over 300% year-on-year when comparing Q1 2019 with Q1 2020. Due to a relatively soft Q4 2019, when investor appetite in gold fell, the demand for gold from these products increased by c. 1,000% quarter-on-quarter.

In terms of performance, the spot gold price returned 3.9% in USD for Q1 this year, second only to US Treasuries among the major asset classes. Of those considered in the report, gold was the best-performing asset for the 12 months to the end of March 2020, with a return of 22.0% in USD.

The Invesco study notes that central banks increased their holdings of gold by 145 tonnes during the quarter, down by 8% compared to the amount purchased during Q1 2019 but an increase of 34.4% compared to Q4 2019. Central banks have been net purchasers of gold every year since 2010, as many of them, particularly in developing economies, look to hedge various risks and diversify their exposures.

Chris Mellor, Head of EMEA ETF Equity and Commodity Product Management at Invesco, said: “Gold has been the stand-out asset class for much of 2020 and demand is expected to continue as markets and investors cautiously deal with the fall-out from the coronavirus.

“Despite such strong investor demand, it is interesting to note that gold supply fell 10.7% in the quarter as the outbreak disrupted mine production. With temporary shutdowns, the amount of gold mined in the quarter was the lowest since 2015. Restrictions also negatively affected recycled gold levels. This situation can be expected to continue into the next quarter.”

Invesco’s Physical Gold ETC has seen US$3.2 billion in net inflows across the first five months of 2020. As at the end of May, the ETC had US$11.4 billion in assets under management. It offers one of the lowest total cost of ownership in Europe with a fixed fee of 0.19% per annum and historically low bid-offer spreads (typically between 2-3 basis points).