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Investment demand lifting gold prices despite slower jewellery purchases

by LLB Editor
6th Aug 20 9:19 am

The Invesco Physical Gold ETC has seen more than $3.5bn of inflows this year – more than a quarter of all flows into European domiciled gold ETCs – and is now Invesco’s largest European product with $13.5bn of assets under management.

Chris Mellor, Head of EMEA ETF Equity & Commodity Product Management, Invesco, commented: “Investors have looked to gold for two main reasons. First as a safe haven during the COVID 19 crisis, helping to protect portfolios against the potential impact of the recession on corporate earnings and therefore risk assets such as equities or corporate bonds. Second, it is seen as a hedge against inflation: if the economic impact of the crisis proves short-lived, with the degree of stimulus and the size of government debts then there is a risk that inflation could return and a real asset such as gold is therefore appealing.

“Gold supply and demand have both been affected by the crisis restrictions but investment demand has helped to lift prices despite slower jewellery purchases. One other reason for demand for physical gold investments such as our ETCs has been the disruption caused to the futures market. Gold futures continue to trade at a premium to physical metal – the active December future is currently at around a $15 premium to the spot price. This makes investing in gold through futures a much more expensive approach than our ETC.”

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