Gold Prices Surge Amid Record ETF Inflows

  • The price of gold has risen past $1,800 psychological level
  • Spot gold up 17% in the first six months of 2020
  • Gold ETF net inflows in H1 2020 exceeds full year record set in 2016
  • COVID-19 uncertainty, central bank actions, weak dollar pushing price higher
  • SPDR Gold Shares and iShares Gold Trust see greatest inflows

This morning the gold spot price crossed the key $1,800 an ounce level for the first time since 2011. This comes against the backdrop of bullish forecasts. Goldman Sachs expects the metal could reach $2,000 in the next 12 months, and Bank of America sees it touching $3,000 an ounce in 18 months. Its all-time record of $1,921.17 was set in September 2011.

Gold has been surging this year, despite demand for jewelry, gold bars and coins declining in big markets like India and China, due to Western investors seeking safety in the asset. The global net inflows into Gold ETFs was $39.5 billion in the first half of this year, according to the World Gold Council. This already exceeds the record set for highest annual inflows set in 2016 ($23 billion). Even going by tonnage, in just six months it beat the previous full year record of 646 tonnes in 2009 by almost 100 tonnes. The demand has been so extraordinary, inflows in the first half of 2020 significantly exceeded multi-decade record levels of net gold purchased by central banks in 2018 and 2019.

Gold ETF
Source: World Gold Council.

As economies confronted uncertainty related to the pandemic and central banks introduced stimulus and cut interest rates, gold-backed funds have seen seven consecutive months of positive flows as of June. "Speculation over the potential impact of a second wave of COVID-19 infections on an already fragile global economy caused a renewed wave of fear and uncertainty. Meanwhile, ongoing asset purchases by central banks to mitigate the impact of the pandemic further reduced the opportunity cost of holding non-yielding assets such as gold," said the report. Also set to possibly push prices higher is the weakening U.S. dollar.

As the price of gold rose 17% over the first half of the year, global gold ETF holdings (in tonnage terms) increased by 25%. Global daily trading volumes reached a record $233 billion per day in March and was at $156.9 billion per day in June, comfortably above the 2019 daily average of $145.7 billion. By the end of June, gold-backed ETFs held 3,620 tonnes of gold worth $206 billion.

The SPDR Gold Shares and iShares Gold Trust funds lead the ranking of funds with greatest inflows in dollar/tonnes terms during H1. See the rest below.

Gold ETF
Source: World Gold Council.
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