- Physical gold ETCs see inflows of $93m in last 6 days, the largest gain for 10 weeks
- Physical gold ETCs now total $4.5 billion or 5.3 Moz
- Physically backed gold ETCs most traded ETC last week and year-to-date
- Investors continue to seek safe haven assets
ETF Securities Limited, the global pioneer of exchange traded commodities (ETCs), experienced large inflows into physically backed gold and silver ETCs last week as investors sought safe haven assets. Physically backed gold ETCs saw $93 million of net inflows in the past six days, the largest weekly increase during the last 10 weeks. Silver also saw net inflows.
With reports of investors spreading bank deposits across a number of banks to benefit from the increased £50,000 government guarantee for bank deposits, physically backed gold ETCs have benefited from the market's desire to reduce risk. Physically backed gold ETCs are backed by allocated 400oz gold bars which carry no credit risk. As a result, ETFS Physical gold (PHAU) and Gold Bullion Securities (GBS) have seen daily net inflows as investors seek safe haven assets during the current financial crisis. Not only do physical gold ETCs carry no credit risk, gold is also uncorrelated to equities, thereby providing diversified portfolios some protection during volatile markets.
In the past six days, ETF Securities' experienced $93 million or 106,000 ounces of gold inflows. This was the largest net inflow since mid July when gold priced rallied from $920 to $980 per ounce. Despite a fall in gold prices last week, PHAU and GBS' total assets reached 5,340,000 ounces or $4.5 billion. For the year to date since 1 January 2008, the physically backed gold ETCs experienced $992 million or 1,530,000 ounces of inflows, growing by 30% over the period.
ETFS Physical Silver (PHAG) also experienced net inflows last week of $7 million last week, an increase of 4% or 1,194,729 ounces. Over the past six weeks, ounces have increased by 25% to 12.8 million ounces, the highest since 30 January 2008. Total assets for PHAG now stand at $141 million.
All of the physical precious metal ETCs are backed by allocated metal - uniquely identifiable bars which carry no bank credit risk. These precious metal bars and ingots are held in trust in London by the Custodian HSBC Bank USA N.A., the world's leading Custodian for ETCs. The metal held with the Custodian must conform to the rules for Good Delivery of the London Bullion Market Association (LBMA) and London Platinum Palladium Market (LPPM). Securities are only issued once metal is confirmed as being deposited into the Company's bullion account with the Custodian. Consistent with allocated gold, no precious metal is borrowed, loaned out nor does it earn any income.
Last week, European trading volumes for gold ETCs also continued to lead the statistics with $330 million or 48% of the $680 million total ETC volume accounted for by physically backed gold ETCs. In the London Stock Exchange's (LSE), August statistical report for ETCs and ETFs, it showed that physically backed gold ETCs contributed £800 million (or 17%) to total ETC/ETF volume of over £3 billion. Combined, there were more than 300 trades per day in these ETCs alone and more than 1,100 trades per day across all the 113 LSE-listed ETCs.
Recently, ETF Securities also obtained a Sharia certificate from Al Qalam making 5 of the physically backed ETCs Shariah compliant. The ETCs provide investors access to investments consistent with Islamic principles. The Shariah compliance was sought in response to the rising global demand for ETCs, in particular from the Middle East, North Africa and Asia.
Nik Bienkowski, Chief Operating Officer, said: "We have seen robust demand for physically backed gold ETCs in a time where many other asset classes are experiencing outflows. ETCs have lowered many of the barriers that previously prevented many investors from investing in the precious metals market, including access, trading and operational risks, and secure storage.
"Unlike many other commodities, precious metals are durable, homogenous and easily stored, enabling the ETCs to be backed by allocated physical bars which have transparent pricing and carry no credit risk. As a result, physical ETCs save investors from many of the difficulties associated with purchasing precious metals such as access to physical bars and then having to store and insure those bars.
"In volatile times like these, gold comes into its own. It is used as a store of value and a safe haven. In addition, it has been shown to have no correlation with equities, thereby providing additional diversification benefits to investment portfolios."
