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Gold ETFs 2020 inflows at $40 billion so far, global uncertainty adds to glitter

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In this calendar year so far, gold-backed exchange traded funds (ETFs) have seen global net inflows touching $39.5 billion, industry lobby group World Gold Council has said. With that, gold ETFs have beaten the previous full year record of $23 billion, set in 2016.

With returns of more than 15% in this calendar year, gold has been a clear favorite among investors, courtesy the coronavirus pandemic. Elevated uncertainty around global economic revival has pushed gold prices to record highs, as investors rush towards the safe haven asset. Gold continued its outperformance of other major asset classes such as equities, in June.

Currently, global price of gold is at $1800/ounce (oz). Research houses Bank of America Securities Ltd and Goldman Sachs Ltd foresee the price of yellow metal touching $3,000/oz and $2,000/oz, respectively.

Factors including a weak US dollar, rising tensions between China and the world along with low-interest rate scenario, bode well for this precious metal. Commodity analysts expect investment demand in gold to remain high for the remainder of year as well.

The WGC report adds gold ETFs recorded their seventh consecutive month of positive flows, adding 104 tonne in June. This is equivalent to $5.6bilion or 2.7% of assets under management (AUM) – taking global holdings to new all-time highs of 3,621 tonne.

Region wise, North American funds dominated activity in June, accounting for 80% of global net inflows. The region added 83 tonne. European-listed funds added 18 tonne with Swiss- and German-based funds seeing the highest increases and offsetting declines in UK-based funds. Asian-listed fund holdings rose fractionally during the month, by 0.4 tonne, with India-based funds seeing the largest increase in the region. Funds listed in other regions registered a 3-tonne increase, the report said.

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