Research library

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

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.

Strong growth in global investment demand for gold in Q3 partly offset weakness elsewhere as COVID-19 remained in the driving seat.

In this paper, we seek to answer those questions by assessing how gold lease rates have been affected in the past through changes in the demand to borrow gold and the supply of gold available for lending.

Gold has been on a generally positive trend for the past few years. However, the onset of the global COVID-19 pandemic has made gold’s relevance as a hedge even more apparent and accelerated its price performance. Gold increased by 17% during the first half of 2020, moving up by an additional 10% in July.  

Record H1 inflows into gold-backed ETFs offset weakness in all other sectors of the market, with demand hit by the ongoing global coronavirus pandemic.

Gold is a clear complement to equities, bonds and broad-based UK investor portfolios. As a store of wealth and a multi-faceted hedge, gold has outperformed many major asset classes while providing robust performance in both rising and falling markets.

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.

The COVID pandemic and the ensuing economic lockdowns around the world have slashed global growth forecasts in 2020, but expectations of the speed of the economic recovery are quite varied. We analyse the potential performance of gold across four hypothetical scenarios provided by Oxford Economics.

The global COVID-19 pandemic fuelled safe-haven investment demand for gold, offsetting marked weakness in consumer-focused sectors of the market.