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Gold ETFs Enjoyed a Resplendent Year

This article was originally published on ETFTrends.com.

Physically backed gold exchange traded fund saw holdings surge on increased investment demand as investors looked to safeguard their assets in a year marked by heightened volatility.

According to the World Gold Council, holdings in global gold-backed ETFs and similar products increased by 69 metric tons to 2,440t in 2018, bringing in about $3.4 billion in net inflows. Global gold-backed ETFs grew 3% in 2018 on strong demand for European funds and increased global inflows over December, making this the first time since 2012 that the value of gold-backed ETF holdings finished the year above $100 billion.

“Global gold-backed ETFs grew 3% in December, marking a strong close to the year against the backdrop of continued market volatility.” Joe Cavatoni, World Gold Council’s Managing Director, USA & ETFs, said in a note.

While European-based funds expanded on the increased safety demand, especially with geopolitical risks from the likes of the Brexit negotiations and Italian politics fueling risk-off sentiment, U.S. funds experienced outflows in response to the weak performance of gold during the third quarter. Nevertheless, these flows reversed over the fourth quarter to make up for most of the previous losses.

For example, the SPDR Gold Shares (GLD) attracted $1.4 billion in net inflows over December 2018 alone.

“In North America, low-cost US-based ETFs were a bright spot, raising $775mn in assets and signalling increased demand for holding gold as a long-term strategic asset,” Cavatoni added

Gold prices rallied off the August lows and stood out as a safe haven play over the fourth quarter as the broad equity markets plunged, with the S&P 500 down 14% over the period.

Furthermore, the strong U.S. dollar also weighed on prices, but the long-dollar hedged gold strategy finished the year higher, buoyed by the USD. The SPDR Long Dollar Gold Trust (NYSEArca: GLDW) gained 3.7% over the past year, whereas GLD declined 3.0% over the period.

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