Investors bought a lot of gold again in April

Investors bought a lot of gold again in April, according to new figures from the World Gold Council. Globally, ETF gold holdings rose by 170 tonnes to a new record of 3,355 tonnes. Converted to the current gold price, these gold ETFs now manage a record amount of $184 billion. Of that, $9.3 billion came in in the month of April, the largest monthly inflow ever recorded. U.S. investors in particular got into gold last month. European investors have also bought a lot of gold in recent months.

As the graph below shows, the popularity of these investment products is strongly correlated with the Gold price. When the price of the precious metal rises, investors step in, while they sell when the price falls. In April, the gold price in euros rose to a record high, while the price in dollars reached its highest level in eight years. This once again led to a boom in gold-related investments such as ETFs.

In recent months, investors have been stepping up again on a large scale in gold, but the influx is not yet exceptional from a historical perspective. Gold ETFs were also popular in the spring of 2016, when the price of the precious metal skyrocketed by 20% in a matter of months. According to the World Gold Council, the net inflow over the past twelve months is currently higher than during the previous peaks of 2009 and 2016 at 879 tonnes.

Gold stocks ETFs to all-time high, click for a larger version (Source: World Gold Council)

Investors get back into gold due to corona crisis, click for a larger version (Source: World Gold Council)

Gold ETFs vs. Physical Gold

With the introduction of gold ETFs in 2003, it became even easier for investors to buy gold. The shares of these funds are traded on the stock exchange and are therefore easy to integrate into an investment portfolio. The shares are backed by a physical gold stock, which the fund can replenish by issuing new shares. If the gold price falls, the fund can Selling gold and take stocks out of the market. For example, an ETF aligns the value of its shares with the price of gold.

Although ETFs are an easy tool to invest in gold, they are not a fully-fledged alternative to physical gold held in your own hands. With most ETFs, you track the price of gold, but there is no option to convert shares to physical gold. In an extreme scenario, you first have to sell the shares and then use the proceeds to get your hands on physical gold. The experience of the past few months has taught us that the delivery times of physical gold can be quite long in that scenario, which means that you have to wait longer for your gold and often pay a higher premium.

Gold ETFs are a good tool to gain exposure to the gold price, but the downside is that you don't have a claim on physical gold. Therefore, it is preferable to also keep a portion of your assets in physical gold. This can be in the form of gold coins and bars. This can also be done in combination with professional storage via Aunexumsafe. Your precious metal will then be stored safely and completely in your name separately (allocated).

For more information about Buy gold and the storage of precious metals, please contact us at klantenservice@hollandgold.nl or by phone on 088 - 46 88 400