Invesco’s gold ETC reaches record high in assets as investors predict further rise in gold price
A new study from Invesco reveals that 72 per cent of professional investors believe the gold price will rise in 2019, while Invesco announces that the amount of assets invested in Invesco Physical Gold ETC has reached a record high on the product’s 10-year anniversary.
Of the professional investors interviewed, 25 per cent thought the price would be the same or lower by the end of the year, while only a small percentage of respondents did not have a view. Of those that anticipated an increase, the forecast value was USD1,485 per troy ounce at year-end. Month-to-date, the gold price has risen by 8 per cent to around USD1,400.
When asked what the primary reasons would be for the rise in gold prices, the most popular responses were: increasing trade conflicts between the US and China (71 per cent), economic downturn in the US and/or Europe (60 per cent), sustained downturn in major stock market indices (46 per cent) and central banks holding or cutting interest rates (37 per cent).
Two-thirds of respondents thought defensive capital preservation would be the key driver behind an increased allocation to gold from institutional investors in 2019, while 11 per cent said it would be greater portfolio diversification. Only 15 per cent said they did not believe institutional investors will allocate more to gold this year.
Chris Mellor (pictured), Head of EMEA ETF Equity and Commodity Product Management at Invesco, says: “We requested the survey to help us better understand what investors think about gold in the current environment and how they prefer to gain exposure. This week marks the 10-year anniversary of the launch of the Invesco Physical Gold ETC, which is now the largest of our exchange-traded products in Europe, with more than USD6 billion of assets.”
Survey participants were asked, “When thinking of ETCs that track the price of gold, which of the following benefits do you believe are driving demand for those products?” The most popular answers were: ease of use (61 per cent), better liquidity (59 per cent), lower charges / costs (57 per cent) and greater transparency (34 per cent).
The attraction of physically backed gold ETCs is evidenced by market flows, Invesco says. Gold ETCs listed in Europe have gathered USD3.5 billion of assets so far this year, taking total assets invested in these products to almost USD50 billion. Year-to-date, the Invesco product has seen 28 per cent of these net inflows.
The Invesco Physical Gold ETC uses the proceeds of investments to purchase physical gold bars, which are placed in a segregated account and stored securely in the London vaults of JP Morgan Chase Bank, which has been the custodian since the launch of the fund. With an annual fixed fee of 0.24 per cent and on-exchange bid-offer spread typically around three basis points, the product offers one of the lowest total-cost exposures to the gold price in Europe.