GOLD ETF hits $2 billion as prices hit new records


Kris Walesby

In times of trouble, investors tend to turn to gold.

That truism is being played out before our eyes again this year amid a global pandemic, a global recession and, possibly but hopefully not, a global depression notes Kris Walesby, CEO ETF Securities.

A third element of the ‘triangle of trouble times’ is of course the heightened trade and security tensions between the world’s two largest superpowers, USA and China, says Walesby.

The price of gold in the last week of July 2020 is now at an all-time high in both US dollars terms: nudging the USD 2000 an ounce, and spectacularly so in Australian dollar terms at circa AUD 2700 (see accompanying graphs).

The question for the average investor who subscribes to the gold ascension is how to act.

Walesby adds: “The two simplest, efficient and most accessible routes to gold ownership are via investing in ASX listed gold mining equities, like the three largest Australian producers – Newcrest (ASX:NCM) Northern Star (ASX:NST) and Evolution Mining (ASX:EVN).  Alternatively, and just as easily, investors can purchase a pure gold ETF (exchange traded fund), again listed on the ASX.”

ETF Securities Physical Gold ETF with the ASX code GOLD was the world’s first such pure gold ETF.

Walesby says: “The GOLD ETF is backed by physical allocated gold bullion held by JPMorgan Chase Bank, N.A. (as the custodian) in London and is unhedged.  Each physical bar is segregated, individually identified and allocated which means there is no credit risk. Investors can choose to redeem units for the physical holdings.

“Gold arguably began its most recent climb to breach the previous peak in mid-2019, when many investors considered the value of gold in a market where negative interest rates had become the norm.

“We only hit the $1 billion milestone in assets under management with our GOLD ETF in September 2019, so the combination of price moves and inflows has led to the assets doubling in less than a year. Year to date inflows total $578m into the fund as at 28th July and total assets under management are now $2 billion.

“Without wishing to sound too pessimistic, let’s not forget that gold should do well if, and when, investors realistically evaluate the chances of a sustained equity market recovery compared to the possibility that the world may be entering the first great depression of the 21st century,” notes Walesby.

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