European investors pile into physically-backed gold ETFs

Aug 6th, 2012 | By | Category: Commodities

ETF Securities, one of Europe’s leading providers of Exchange Traded Products (ETPs), has revealed that net inflows into its physically-backed gold products have surpassed the $1 billion mark for the year, as investors look to hedge against continued financial, economic and political turmoil.

Investors pile into physically-backed gold ETFs

So far this year investors around the world have allocated a total of $1.2 billion in net new assets into physically-backed gold ETPs issued by ETF Securities.

Amid further signs of slowing global growth, investors around the world have allocated a total of $1.2 billion in net new assets into the firm’s physically-backed gold products, with the bulk originating from the European market.

ETF Securities listed the world’s first exchange-traded gold product in 2003. Today, more than $17 billion of the firm’s assets reside in products that track gold.

Kris Walesby, Head of Capital Markets at ETF Securities, said: “Investors are understandably concerned about how to position themselves in light of continued market uncertainty. We continue to see lower overall trading volumes in the US and European stock markets, while global M&A activity has also been in decline. Yet inflows into our gold ETPs have been particularly strong this year, as investors seek additional exposure to the metal.

“This is testament to the quality and liquidity of our gold products, and to the trust that investors have placed in our reputation as market-leaders in this space. Investors need to be confident that they can execute effectively during periods of heightened market stress, as well as under normal conditions. Liquidity is a fundamental driver in delivering best-execution, and this helps to reduce the overall cost to the investor.

“We continue to expand the range of products available to investors, and are committed to making gold and other commodities more accessible.”

ETF Securities’ most popular gold product is the ETFS Physical Gold ETC (PHAU), detailed below, with almost $7.7 billion in assets. Whilst PHAU may not have the lowest headline total expense ratio (TER), the product benefits from deep liquidity and narrow spreads, thus reducing total cost of ownership.

ETFS Physical Gold ETC (PHAU)
The ETFS Physical Gold ETC is designed to offer investors a simple, cost-efficient and secure way to access the gold market by providing a return equivalent to movements in the gold spot price less the relevant management fees. PHAU is backed by physical allocated gold held by the custodian (HSBC). All physical gold metal held with HSBC conforms to the London Bullion Market Association’s (LBMA) rules for Good Delivery. London listed. TER 0.39%.

London-listed alternatives to PHAU include:

iShares Physical Gold ETC (SGLN)
The iShares Physical Gold ETC is a physically-backed Exchange Traded Commodity (ETC) offering investors accessible, liquid and transparent exposure to the day-to-day movement of the price of gold, as per the London PM fix price. The security is backed by physical gold bullion held as allocated gold bars with the custodian, JPMorgan. London listed. TER 0.25%.

db Physical Gold ETC (XGLD)
The db Physical Gold ETC is backed by a direct investment in physical gold and provide investors with exposure to the gold spot price via London Good Delivery Gold Bars. The issuer (Deutsche Bank) has direct and sole ownership of the gold which is stored in secure vaults in London (JP Morgan and Deutsche Bank). Each physical ETC security entitles the holder to a specified quantity of gold of the segregated pool owned by the issuer. London listed. TER 0.29%.

Source Physical Gold P-ETC (SGLD)
The Source Physical Gold P-ETC provides physically-backed exposure to the performance of the London Gold Market PM Fixing Price in USD. Each Gold P-ETC is a certificate which is secured by gold bullion held in JP Morgan Chase Bank’s London vaults. London listed. TER 0.29%.

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