Gold-backed exchange-traded funds and similar products (gold ETFs)1 have flourished since their introduction in 2003, attracting both institutional and retail investors across the globe.2

Recently, gold has become globally accepted as a strategic asset amidst a high-risk and low-rate environment spurring investment demand and the expansion of the gold-ETF market.

The increased quantity, size and location of gold ETFs have provided easier and more efficient access for investors allowing them to utilise many general advantages of ETFs.

While there are numerous ways for investors to own gold, such as bars, coins, derivatives, over-the-counter (OTC) instruments and gold stocks, many have embraced gold ETFs for qualities such as cost efficiency, transparency, and liquidity.

The growth and evolution of gold ETFs have already helped advance the broader gold market and are likely to continue to do so, providing additional support for the role of gold in portfolios.

Gold ETFs are global

Through September 2020, holdings in the 83 active gold ETFs we track totalled 3,880t, with total assets under management (AUM) of US$235.4 billion (bn)3 – record highs in both tonnage and value terms

One of the reasons for this growth is geographic diversification of gold investors compared to 17 years ago, when access to gold via ETFs was limited to a few funds, primarily in North America. While gold ETFs listed in North America continue to expand, maintaining their relevance on a global scale, funds in other regions of the world have also seen remarkable growth since their introduction (Chart 1, Table 1 and Chart 7, p6 in the full report). In particular, European funds saw a rapid growth in their share of global gold-ETF assets: 41% in September 2020 vs 16% 15 years ago (Chart 8, p7 in the full report).4 Meanwhile, total gold holdings in Asian gold ETFs grew from 1t in March 2007 – when the first Asian fund was introduced – to 121t in September 2020, adding seven new funds in 2020 alone (Chart 9, p7 in the full report).


Chart 1: Gold-ETF holdings in tonnage and AUM have grown to all-time highs with diversified global growth

Chart 1: Gold-ETF holdings in tonnage and AUM have grown to all-time highs with diversified global growth

Regional holdings in global gold ETFs since 2003*

Sources: Bloomberg, ETF company filings, World Gold Council; Disclaimer


Table 1: Regional funds and assets

RegionNo. of funds listedTotal AUM US$bnTonnes
North America16126.82,089.4


*Data from active funds listed as of 30 September 2020.
Source: Bloomberg, ETF providers, World Gold Council


Rising gold investment demand and the evolution of gold ETFs

The rising investment demand for gold

Gold valuation can be intuitively thought of as an equilibrium pricing of supply and demand, driven by strategic and tactical positioning (Figure 1). 


Figure 1: Main drivers of gold’s performance


Focus 1


Source: World Gold Council


Strategic demand is highlighted by:

  • gold’s solid, long-term returns, driven by economic expansion
  • its effectiveness in times of uncertainty as a hedging and diversification tool (Chart 13, p11, Appendix II, p10 in the full report).

Tactical demand is driven by:

  • gold’s relative attractiveness or opportunity cost 
  • momentum positioning that amplifies trends.

Many investors have come to understand these drivers and gained confidence in gold’s strategic role in portfolios, thereby strengthening global investment demand via gold ETFs.

The significant growth in gold’s investment demand constitutes a major pillar for the gold-ETF market’s rapid expansion. Global investment demand for gold has increased by more than 270% since the birth of gold ETFs in 2003, and reached 1,270t in 2019 (Chart 5, p5). 

Global investors’ allocation to gold – mainly through gold ETFs – rose rapidly in 2020

Inflows into global gold ETFs have been the most vital driver of investment demand for gold in 2020 (Chart 2). Global gold ETFs collectively held 3,880t – a new record – as of September 2020, bringing the y-t-d global net inflows to 1,003t, or US$55.7bn, significantly higher than the largest annual inflows prior to 2020, both in tonnage terms (646t in 2009) and US dollar value (US$23bn in 2016). 


Chart 2: Inflows in gold ETFs have been the main driver for the rise in global investment demand for gold in 2020* 

Chart 2: Inflows in gold ETFs have been the main driver for the rise in global investment demand for gold in 2020*

Sources: Bloomberg, Metals Focus, World Gold Council; Disclaimer

*Through 30 September 2020.


With the COVID-19 outbreak spreading around the globe, many regions experienced sharp declines in their economic growth, leading to unprecedented expansionary monetary policies from major central banks. While the weakened economic growth and lockdown measures to contain the pandemic in major markets hampered global gold consumption, the rising risk and uncertainty reduced the opportunity cost to hold gold, and the bullish gold price momentum has fuelled gold’s investment demand so far in 2020. Through the third quarter of 2020, the global investment demand for gold reached 1,630t and is on track for record yearly levels on an annualised basis.  

As a result, global investment demand for gold has outweighed gold consumption so far this year. In the first three quarters of 2020, investment demand made up 55% of total gold demand (Chart 5, p5). In comparison, the combination of jewellery demand and gold used in technology accounted for nearly 90% of total demand in 2003 globally, when the first gold ETF made its debut.5

Did you know?

If global, gold ETF assets were a public company or a central bank, their capitalisation would rank among the top 1% of listed companies worldwide, and would have the second-largest gold reserves in the world, behind only the US Federal Reserve.5


Total cost of ownership plays a key role in gold investment choices 

Investors can gain access to the underlying performance of gold in a handful of ways. Many investors prefer to hold gold in the form of bars and coins, while others actively trade gold futures and gold-relevant stocks, like gold miners. Considerations like portfolio sizing, rebalancing frequency, operational aspects, leverage, commissions, bid/ask spreads, storage and insurance costs and holding periods are just a few of the explicit and implicit costs an investor might use to formalise the total cost of ownership and ultimately their investment choice7 (Figure 2).

Figure 2: Accessing gold can be accomplished several ways



Fig 2


Although gold futures, vaulted gold, mining stocks, and bars and coins remain very relevant and important investment tools, gold ETFs have attracted investors for several reasons. These include: 

  • Cost efficiency: While expense ratios of major global mutual funds with precious metal strategies range from 98 basis points (bps) to 456bps8, global gold-ETF management fees vary between 7bps and 297bps per year due to the economies of scale afforded by their structure.9 Many investors have shifted gold exposure to low-cost gold ETFs, using various funds listed in the US and Europe, many of which charge less than 20bps a year. This trend in gold ETFs is a by-product of the broader ETF market.
  • Transparency: Gold ETFs hold gold bullion in a standardised form of quality, measured in troy ounces, kilograms, or grams. For instance, many gold ETFs around the globe exclusively hold London Good Delivery bars, each weighing approximately 400 troy ounces with a minimum fineness of 99.5%, based on the LBMA gold price. More recently, many funds, particularly in Asia, have linked their gold ETFs to newer benchmarks like the domestic price of gold in India10 and the Shanghai Gold Benchmark contracts in China. This has allowed local investors to have direct exposure to local gold pricing within their respective regions.
  • Liquidity: Collectively, global gold ETFs’ trading volumes averaged US$1.8bn per day in 2019 and have nearly doubled to US$3.5bn per day so far in 2020 (Chart 6, p5), rivalling most stocks globally. Such a deep and liquid market enables retail investors to trade gold ETFs with minimal friction costs and is also capable of facilitating large trades for institutional investors. A deep and broad market has provided investors with an extra source of liquidity in times of distress, like the financial market sell-off witnessed in March 2020.11


Benefits of gold ETFs on the broader market

Positive structural changes and increased availability

Structural changes have played a role in the evolution of the global gold ETF landscape. The establishment of the Shanghai Gold Exchange (SGE) created a fundamental opportunity for gold investment in China. And subsequently when China lifted its ban on retail bullion trading in 2004, the nation’s annual gold investment demand surged by 59 times between 2003 and 2013, partially contributing to the birth and expansion of the region’s gold ETF market.12

The increasing number of products listed outside of the US has enabled many non-US investors to gain access to gold ETFs (Chart 3). For instance, when the global financial crisis unfolded in 2007, over 80% of global gold ETF assets were concentrated in North America. Growing investor interest in gold as a strategic asset amid various economic and geopolitical uncertainties as well as regulatory support in local markets – for the listing of gold ETFs – have been vital drivers of the rising geographic diversity in the gold ETF market, with funds currently listed in 18 countries (Table 2, p6 in the full report).13 This has led to currency-hedged gold ETFs, which allow an investor to hold gold in a non-local currency of their choice.


Chart 3: The number of listed global gold ETFs has grown rapidly since the Financial Crisis*

Chart 4: The number of listed global gold ETFs has grown rapidly since the Financial Crisis*

Sources: Bloomberg, ETF company filings, World Gold Council; Disclaimer

*As of 30 September 2020.


Competition reduced premiums and benefitted retail investors

The emergence of gold-backed ETFs has positively impacted the retail physical gold market. Prior to 2003, gold bars and coins were among retail investors’ primary choices to access the gold market. While storage – either paying a third-party to vault or bearing the cost directly – could be a major issue for many bar and coin investors, there were also extra expenses such as labour charges and other gold retailing costs. As the popularity of gold ETFs grew, their cost-effectiveness triggered additional competition in the retail market. While data for premiums on bars and coins is not always accessible, available data combined with anecdotal evidence suggests that as the gold ETF market has grown and developed, retail physical gold investment products in developed markets have experienced lower price premiums (Chart 4).14 


Chart 4: Physical gold investment product premiums have fallen since gold ETFs became broadly available in many markets

Chart 5: Physical gold investment product premiums have fallen since gold ETFs became broadly available in many markets

Sources: Bloomberg, Certified Coin Exchange, China Gold Jewellery, Shanghai Gold Exchange, World Gold Council, Wind; Disclaimer

*Premiums measured as the difference between prices of these products and the LBMA PM gold price.

Comparable periods of 1991-2004 and 2005-2019 for Eagle, Maple Leaf and Krugerrand coins, 1997-2005 and 2005-2019 for Kangaroo and Philharmonic coins, 2010-2012 and 2013-2019 for Chinese gold bars due to data availability and according to when gold ETFs were introduced in the region.   

**Gold bars are the major retail physical gold investment form in China. 


Looking forward

Gold ETFs – the road ahead

Gold ETFs have gained popularity amongst investors across the globe since their debut. Global gold ETF total holdings have been expanding at 42% per year on average since 2003, and their trading volumes are near record levels. And all regions have witnessed significant growth in their respective gold ETF markets during the past 17 years. With the investment demand for gold rising rapidly in recent quarters, the unique features of gold ETFs, including cost-effectiveness, market depth, efficiency in tracking the spot gold price, safety of storage and the fact that they are securely backed by physical gold, have increased the attractiveness of these products’ markedly.   

And as gold has become more relevant for retail investors the World Gold Council has helped establish the Responsible Guide to Retail Gold Investment (RGIP), (Focus 2, p11 in the full report), aiming to guide investors to safe, transparent and efficient gold investment products. 

Looking ahead, we believe investors’ confidence in the role of gold as a strategic asset could continue to strengthen. As the pandemic continues, its profound impact on social and economic activities globally has steered expectations for a V-shaped economic recovery towards slower paths. Against such a backdrop, economic uncertainties are likely to remain high, pushing up investor safe-haven demand. And as discussed in our Gold mid-year outlook 2020, while lack of fundamental support for the equity market’s current valuation-surge may lead to potential sharp pullbacks, the ultra-low-rate environment is limiting bonds’ effectiveness in reducing risks and providing returns, thus improving the opportunity cost of holding gold. Furthermore, as gold prices breach historical highs, the bullish momentum could continue to attract investor attention in different regions.

With economic and financial uncertainties remaining high, interest rates hovering at record lows, and the bullish price momentum attracting more attention, investment demand for gold could continue to rise through the remainder of 2020 and beyond, potentially offsetting the weakness in gold’s consumer demand and fostering continued gold-backed ETF expansion. 


Chart 5: Investment demand for gold today is significantly higher than in 2003*

Chart 6: Investment demand for gold today is significantly higher than in 2003*

Sources: Bloomberg, Metals Focus, World Gold Council; Disclaimer

*As of September 2020, investment demand for gold consists of global bar and coin demand and ETF inflows through the first three quarters of 2020.


Chart 6: Global gold ETF trading volumes have nearly doubled in 2020*

Chart 7: Global gold ETF trading volumes have nearly doubled in 2020*

Sources: Bloomberg, World Gold Council; Disclaimer

*Through 30 September 2020. 


1We define this universe as open-end, gold-backed ETFs or closed-end funds traded on exchanges whose shares are at least 90% backed by physical gold, as well as ETFs that hold baskets of precious metals and are adjusted for the percentage of gold. See Global gold-backed ETF holdings and flows.

2Gold Bullion Securities listed the first gold-backed ETF on the Australian Securities Exchange in 2003 (currently managed by WisdomTree), followed by Gold Bullion Securities in the UK later that year. The Central Fund of Canada did, however, provide a closed-end fund created in the 1960s that allowed for gold ownership beginning in 1983.

3Individual gold ETF funds are defined as funds backed physically by gold with individual International Securities Identification Numbers (ISIN)s. There are some funds with multiple share classes that may trade on different exchanges with different ISINs that are grouped together into a collective ‘fund family’.

4See Appendix I in the full report for more information.

5The remaining 10% was linked to bars and coins. At the time, central banks were consistent net sellers of gold and thus are not included in demand.

6Source: World Gold Council, Central Bank Statistics.

7We define total cost of ownership as a function of both explicit and implicit costs that have both objective and subjective qualities for each investor to consider.

8Based on data from 253 mutual funds with a precious metals strategy as of 30 September 2020 sourced from Bloomberg.

9Based on physical gold-backed ETFs we track as of September 2020.

10Domestic price of gold in India is the landed cost of gold, which can include inputs like taxes and duties, transportation, and manufacturing costs, etc. The local MCX gold Index includes the landed cost plus the premium or discount in the market and can be considered a close proxy to the domestic price of gold.

11For more information on liquidity see Appendix II in the full report.

12Investment demand is calculated as the sum of demand for gold bars and coins and ETF inflows (which were not available until 2013) in China.


13As of 30 September 2020.

14Regions that have a few small or even no gold ETFs have not experienced the same premium reductions. However, it is possible that newer gold ETF markets like China and India could experience this effect as additional products create a more competitive landscape.


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