Global gold-backed ETFs (gold ETFs) and similar products added 298 tonnes(t), or net inflows of US$23bn, across all regions in the first quarter of 2020 – the highest quarterly amount ever in absolute US dollar terms and the largest tonnage additions since 2016. During the past year, gold ETFs added 659t, the highest on a rolling annual basis since the financial crisis, with assets under management (AUM) growing 57% over the same period.
Gold plays a prominent role in reserve asset management, being one of the few assets that is universally permitted by the investment guidelines of the world’s central banks. This is in part due to the gold market being deep and liquid – a key requirement of reserve asset managers.
Gold benefits from diverse sources of demand: as an investment, a reserve asset, a luxury good and a technology component. It is highly liquid, no one’s liability, carries no credit risk, and is scarce, historically preserving its value over time.
We believe that the recent volatility in the gold price was driven by massive liquidations across all assets and likely magnified by leveraged positions and rule-based trading.
This primer serves as an introduction to China’s gold market. It provides an overview of China’s jewellery and investment markets, key drivers of demand and the gold mining industry.
Global gold-backed ETFs and similar products added 61 tonnes(t), or net inflows of US$3.1bn, in January across nearly all regions, boosting holdings to new, all-time highs of 2,947t.1 Combined with a gold price increase of nearly 5%, assets under management (AUM) grew 8% in US dollars during the month.
Our analysis illustrates that adding between 2% and 10% in gold to a hypothetical US pension fund average portfolio over the past decade would have resulted in higher risk-adjusted returns.