Chennai: In a development that can boost the upward movement of gold prices in the near future, assets managed by European gold-backed exchange traded products touched an all-time high of 1121.4 tonnes in the March quarter.
Since the start of 2016, AUM of European gold-backed ETPs have been growing fast, hitting a record high level in the last quarter. European gold ETFs now account for 45 per cent of the global gold-backed ETP market, according to the data from World Gold Council. Growing holdings of gold ETFs is a key indicator of the investment sentiments and has helped the upward movement of gold prices during the last bull-run.
Since their emergence in 2003, the ETPs have been growing their AUMs till the end of 2012, when the gold price hit record high levels. AUM of European gold ETFs were quite closer to 1,000 tonnes at that time.
When the gold prices fell in 2012, gold ETF AUMs also started receding and continued to decline till 2015. In 2016, the ETFs added assets of 281 tonnes, 149.7 tonnes in 2017 and 96.8 tonnes in 2018.
The value-eroding negative bond yield environment as well as the spate of political worries, including Brexit, has underpinned the flight to gold in the recent past.
Loose monetary policy and negative bond yields have been indicating that the global and European economy is slowing. Geopolitical uncertainties too have been weighing heavy on investors’ minds. Further, over the past three years, European equity market performance has been significantly lagging behind. WGC expects that these factors will underpin the demand for gold ETFs in 2019 and beyond.
“Increased European ETF inflow is a testimony to the slowing pace of economic growth in the EU region, along with the kind of uncertainties hanging around Brexit and its impact. This is likely to keep gold prices supported. Central banks also have acknowledged the future risks and are diversifying from US dollar. $1250 per ounce remains a good support from where prices can rebound towards $1360- $1400 levels in the second half of the year,” said Himanshu Gupta, Vice President and Head of Commodities and Currencies Research, Globe Capital.
