iShares Physical Gold ETC surpasses $15bn AUM as gold price tops $2,000/oz

Aug 5th, 2020 | By | Category: Commodities

The iShares Physical Gold ETC (IGLN LN) has surpassed $15 billion in assets under management – the first European-domiciled gold ETP to reach the milestone – just as the gold price set its own record by topping $2,000/oz.

iShares Physical Gold ETC passes $15bn milestone as precious metal tops $2,000

The gold price topped $2,000/oz for the first time on Tuesday 4 August.

The gold price crossed the $2,000 threshold on 4 August, meaning the precious metal has gained 30.4% year-to-date.

Momentum remains strong with gold priced around the $2,040 mark in intraday trading on 5 August.

Gold’s success has been driven by a surge in investor demand for haven assets to bolster portfolios from the negative economic consequences of the coronavirus pandemic.

The metal has also benefitted from unprecedented monetary stimulus enacted by central banks to combat the impact of the pandemic including the slashing of interest rates and the ramping up of quantitative easing programs.

This drastic turn to monetary easing has caused real yields to fall to record lows, boosting the relative attractiveness of non-income-producing assets such as gold. It has also increased inflation concerns which have supported gold as the precious metal has historically acted as a hedge against rising prices.

Alongside this US dollar weakness has contributed to further gains in the gold price by making it cheaper for non-USD-denominated investors to buy.

While gold’s price performance has lifted the AUM of all gold-backed ETPs, most products have also recorded rising assets from consistent net inflows. The World Gold Council reports that net inflows into gold ETPs globally reached 734 tonnes ($39.5bn) in the first six months of the year, topping the previous annual inflow record of $23bn set in 2016.

As for the iShares Physical Gold ETF, it has experienced eight consecutive months of positive net inflows this year and has raked in more than $5.4bn in net new assets since December 2019.

Brett Pybus, Head of iShares EMEA Investment and Product Strategy at BlackRock, said, “Amid ongoing market uncertainty, investors are increasingly looking to precious metals as a portfolio diversifier and ETCs are an efficient way to achieve direct investment.

“The case for precious metals is one of diversification. Gold, for example, is a great diversifier for portfolios with a sub 0.3 correlation to equities which gets closer to zero the longer you hold it (0 is perfectly uncorrelated). Gold is also an effective inflation hedge and given we expect inflation to pick up in the medium term, it is an important hedging option.”

While the iShares Physical Gold ETC is the first gold-backed ETP in Europe to reach the $15bn milestone, several other ETPs are hot on its heels. The Xetra Gold (4GLD) ETF (4GLD GY) and the Invesco Physical Gold ETC (SGLD LN) currently house $14.6bn and $13.5bn AUM respectively.

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