Stellar growth since 2016
Since their emergence in 2003, gold-backed ETPs (exchange-traded products) have transformed the European gold investment market. At the end of 2012, when the gold price hit a record high around €1,400/oz, assets under management (AUM) were just shy of 1,000t (~US$50bn).
After falling back between 2012-2015, as the gold price came off its highs, inflows into European gold-backed ETPs surged by an annual record of 281t in 2016. The value-eroding negative yield environment, as well as spate of political worries, not least around Brexit, underpinned the flight to gold.
This positive momentum has proven to be long-lasting. Significant inflows of 149.7t (US$6.1bn) and 96.8t (US$3.9bn) were recorded in 2017 and 2018 respectively. AUM in European gold-backed ETPs grew to 1,097t by the end of 2018, hitting multiple record highs in the process. They now account for 45% of global AUM.
Investors face uncertainty
There are three broad factors which explain this surge in demand for gold-backed ETPs in Europe:
- Loose monetary policy and negative yields. The warning lights have been flashing for some time: the global and European economy is slowing.
- Geopolitical uncertainty. Political uncertainty across the continent is also front and centre of investors’ minds.
- Financial market performance and volatility. Over the past three years, European equity market performance has significantly lagged that of other major western markets
Looking ahead, it’s likely these factors will underpin demand in 2019 and beyond.
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