by Peter Schiff, Schiff Gold:
Holdings in gold-backed ETFs charted another all-time high in May as inflows in dollar-terms have already set a yearly record just five months into 2020.
Globally, funds added another 154 tons of gold to their holdings boosting the total to a record 3,510 tons, according to the latest data released by the World Gold Council.
Over the past 12 months, assets in global gold-backed ETFs have nearly doubled
In dollar-terms, year-to-date inflows of $33.7 billion have already exceeded the previous high seen back in 2016.
Another month of positive inflows in May, coupled with the rising price of gold, also pushed assets under management (AUM) in gold ETFs to a new record high of $195 billion.
North American firms led regional inflows for the second straight month and hit all-time highs in May. Funds based in North America increased holdings by 102 tons. North American funds now hold 1,815 tons of the yellow metal, surpassing the previous highs of 1,736 tons charted in December 2012.
European funds saw inflows of 45 tons. UK-based funds led the way, accounting for about 65% of the regional total for the month.
Asian funds – primarily those based in China – added to their holdings as well, with inflows of 4.8 tons.
Funds in other regions, including Australia, added 2.6 tons of gold to their holdings.
The World Gold Council listed four factors helping drive the flow of gold into ETFs.
Gold was up 2.6% in dollar terms in May. Price volatility was also lower.
At the time of publication, gold has outperformed most major asset classes this year, up by more than 15%. Gold’s performance continues to distinguish itself from the wider commodity spectrum, as broader commodity indices are down 22% – 30% this year and oil (WTI) is down by more than 40%.”
Inflows of gold into ETFs are significant in their effect on the world gold market, pushing overall demand higher.
ETFs are backed by physical gold held by the issuer and are traded on the market like stocks. They allow investors to play gold without having to buy full ounces of gold at spot price. Since their purchase is just a number in a computer, they can trade their investment into another stock or cash pretty much whenever they want, even multiple times on the same day. Many speculative investors appreciate this liquidity.