BlackRock and Invesco have seen their gold ETCs break through the $10bn AUM mark amid a rallying gold price and investors seeking haven in the yellow metal as global markets collapsed.
In March, the iShares Physical Gold ETC (IGLN) and the Invesco Physical Gold ETC (SGLD) saw inflows worth $1.5bn and $1.7bn, respectively, accounting for 17.5% and 22.2% of the total funds.
Following growing demand for the precious metal, Invesco slashed the fee for SGLD in February by five basis points to 0.19% which has turned out to be a wise decision. SGLD only had $7.6bn AUM at the time but has since become Invesco’s largest European-listed ETP.
In a sign of growing competition in the space, Amundi also reduced the fee for its Physical Gold ETC (GOLD) in March, underpricing Invesco by 4bps. The fee cut has seen it significantly grow its assets from $1.7bn to $2.5bn.
In Q1, the gold price peaked at $1,698/oz on 9 March, a year-to-date increase of 11.9%, as the rapid spread of coronavirus spooked markets.
The price quickly fell to a low of $1,451/oz towards the end of March as the Federal Reserve announced "unlimited" quantitative easing measures to support global markets. However, it has since sharply rebounded to trade at $1,728/oz, as at 14 April.
Chris Mellor, head of ETF equity and commodity product management at Invesco, said: “Investors are using ETCs to allocate to gold due to their liquidity and low costs – even at a time of abnormal market stress, record spreads, and when traditional physical trading routes and infrastructures are being restricted or even shut.”
Uncertainty around the short and long-term economic impact of coronavirus has continuously driven sharp volatility across many assets, encouraging inflows into safe havens such as gold-backed ETCs, according to a report from the World Gold Council.
Globally, total AUM in gold-backed ETCs was $164.8bn as of 31 March. Europe was the most popular region for gold ETCs as European-domiciled products received $4.4bn worth of inflows. The US and Asia reported inflows of $3.2bn and $309m, respectively.
“Gold has been shown to be a safer store of value during the recent market turmoil than most other assets, and demand from investors has continued to grow,” said Mellor. “We expect this demand to continue in the foreseeable future as investors seek to capitalise on the benefits of ETCs to rebalance portfolios and reflect the market environment.”
The World Gold Council also forecasts the demand to climb as widespread market uncertainty and the improved opportunity cost of holding gold is expected to continue as yields move lower.
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