Investors are flocking to gold ETFs

According to data from ETF Securities In the first half of 2016, the inflow of wealth was dominated by the demand for gold and so-called Short/Leveraged Exchange Traded Funds (ETFs). Demand for these investment products even doubled after the result of the UK EU referendum. ETF Securities' inflows for gold ETFs amounted to $2.3 billion in the first half of this year, of which more than $700 million came in after Brexit, as investors had a strong preference for safe-haven assets. The demand for Short/Leveraged ETFs stemmed from negative investor sentiment and a willingness to capitalize on the prevailing market volatility.

James Butterfill, Head of Research and Investment Strategy at ETF Securities, explains why precious metals are popular with investors right now:

"By far the largest ETF inflows from ETF Securities since the start of 2016 have been in gold ETFs, with total inflows of $2.3 billion in the first half of 2016. This increase reflects the massive migration of investors to safe havens caused by Brexit, uncertainty regarding the ECB's and the Fed's monetary policy, and concerns about the US presidential election.

As speculative positions in gold have reached all-time highs, some investors have started to look to silver as an alternative to gold. Inflows into silver ETFs, which are more attractively valued compared to gold ETFs, amounted to $166 million."

Gold ETFs are by far ETF Securities' most popular investment product this year

After Brexit, more than $700 million fled to precious metal ETFs

What is a gold ETF?

An exchange traded fund (ETF) is an investment product that can be traded as a stock on the stock exchange. These shares are backed up by collateral, in the case of a gold ETF that is a stack of gold bars in the vault (or a claim on gold bars in a vault?). Investors buy ETFs because they are easier to trade than physical gold bars. The disadvantage is that with a gold ETF you do not own physical gold, but only a paper derivative of the precious metal.

Investors flee into precious metals as a safe haven