Gold Investment Trends: More Than Just GLD

July 18, 2011

World Gold Council reports strong investment interest in second quarter.

The World Gold Council tracks ETF flows, futures activity and the purchase of gold bars and coins, and reports on these investment trends each quarter. For the second quarter of 2011, gold investment continues to be strong — no surprise given the uncertainty of global economics.

Gold Price And Performance
If all you followed were the flows in and out of the SPDR Gold Trust (GLD), perhaps by following our weekly reports, you might think the last quarter was a disaster for gold. But you’d be wrong, or at least myopic.

The price of gold averaged $1,507.38 during the second quarter — up 8.7 percent quarter- on-quarter, and 26.2 percent year-on-year. In fact, gold measured in U.S. dollars outperformed major bond, equity and commodity indexes in developed as well as emerging markets.

In fact, gold’s one of the only bright spots in commodities, as prices in the assets class took huge hits in Q2, with a big sell-off occurring between April 29 and May 6.

For a larger view, please click on the image above.

Gold’s own drop was a modest 4.4 percent. Platinum performed similarly, with a fall of 4.6 percent, but other commodities were not as restrained. Copper lost 6.8 percent, oil dove 12.9 percent and silver had the biggest drop of all, with a staggering loss of 25.6 percent.

In the face of sell-offs such as these, gold’s unique standing as a safe haven investment really shined through, which may be attracting investors.

Investment
As most readers know, there are many ways to invest in the yellow metal. Let’s take a look and see what the WGC says about each one.

ETFs
ETFs tracked by WGC continued to experience strong inflows during the second quarter, even as the price of gold rose. An additional 45.6 tonnes of gold flowed into ETFs globally, a 2.2 percent increase, which brought their collective holdings to 2,155.3 tonnes, worth $104.3 billion.

For a larger view, please click on the image above.

Just where are those tonnes going? More than half of the net inflows of gold were into European ETFs, with Julius Baer Physical Gold, the ZKB Gold ETF and DB Gold ETC accounting for 63 percent of the 29.2 tonnes that went into European funds.

Domestically, the iShares Gold Trust (NYSE Arca: IAU), often considered the also-ran in the U.S. gold ETF race, experienced inflows of 19.0 tonnes. The SPDR Gold Shares (NYSE Arca: GLD) bucked the trend and posted a small outflow of 3 tonnes, though it remains the gorilla of gold ETFs with 1,208.2 tonnes of gold held as of June 30, which makes the ETF’s holdings equivalent to the world’s 10th-largest central bank. While it’s impossible to survey every buyer, some investors may have grown weary of paying State Street 40 bps a year to stick gold in a vault, when BlackRock’s more than happy to take 25 bps in IAU.

Beyond buying shares of the various ETFs, many investors choose to trade options on the ETFs. Being the largest, the majority of options are GLD options. WGC states, “Trading volume measured by outstanding call and put contracts on GLD reached a new high of 16.7 million contracts.”

 

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