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Gold-backed ETFs end record 2020 with second month of outflows

  • Gold is traditionally used as a safe store of wealth, and investors rushed to hoard it as the pandemic swept through the global economy.
  • ETFs grew their holdings by 876 tonnes in 2020 - equivalent to around a quarter of the annual output of the world's gold mines.
13 Jan 2021

LONDON: Exchange traded funds (ETFs) storing gold for investors shrank for a second month in December, but nevertheless grew more than ever before in 2020 thanks to massive stockpiling earlier in the coronavirus outbreak, the World Gold Council said on Wednesday.

Gold is traditionally used as a safe store of wealth, and investors rushed to hoard it as the pandemic swept through the global economy.

It also benefits from low interest rates, because these drive down returns on bonds, a competing asset class, and the virus forced central banks to slash rates and commit to keeping them low.

ETFs grew their holdings by 876 tonnes in 2020 - equivalent to around a quarter of the annual output of the world's gold mines, the World Gold Council (WGC) said.

That far outstrips the previous record of 646 tonnes, set in 2009, and took total ETF holdings to 3,751 tonnes, worth around $225 billion at current prices, according to the WGC.

However, momentum turned late in the year as coronavirus vaccines were rolled out and investors refocused on assets that benefit from economic recovery and growth.

Gold prices have fallen to around $1,850 from a record high of $2,072.50 in August, and ETF holdings fell by 109 tonnes in November and 40 tonnes in December, ending a year-long run of growth.