The unprecedented financial turbulence of the last 18 months coupled with gold's status as a safe haven in torrid times has seen investors piling into gold-backed investments, with exchange-traded commodities (ETCs), becoming an increasingly popular means of holding exposure to bullion.
Inflows into ETF Securities Physical Gold ETCs hit an all time high during the first quarter of this year with the ETFS Physical Gold (PHAU) and Gold Bullion Securities (GBS) products rising by $1.1bn. "Gold has enjoyed the perfect storm as investors became increasingly concerned about credit, currency and longer-term inflation risks. Investors are also opting to hold gold as an alternative to cash given the current low interest rates.
"While the recession has seen a drop in jewellery demand, this has been offset by a massive increase in demand for gold as an investment. ETF Securities' gold ETCS now hold more gold than other ETFs or ETCs in Europe and the second most in the world," says Hector McNeil, managing partner at ETF Securities.
He adds that ETCs are becoming an increasingly popular investment vehicle for holding exposure to precious metals such as gold because these products are easy to trade and very liquid. "Investors who previously could not access commodity markets because of various barriers, including regulation, are now using ETFs and ETCs to play this space."
Mr McNeil says he expects the worldwide decrease in commodity production on the back of the credit crunch to drive the gold price up even further over the long term. While ETF Securities has a range of Short Gold products, Mr McNeil says these are not as popular given that most investors view gold as a long term play.
All ETF Securities precious metal ETCs are backed by allocated bullion - uniquely identifiable bars which carry no bank credit risk. The precious metal bars are held by the Custodian HSBC Bank USA, and must conform to the rules of 'Good Delivery' of the London Bullion Market Association (LBMS). Securities are only issued once metal is confirmed as being deposited into each Issuer's bullion account with the Custodian.
Last year, ETF Securities obtained Sharia compliance and the related certificate, for its physically backed precious metals platform issued by ETFS Metal Securities Limited.
| ETFS Physical Gold (PHAU) | |||
|---|---|---|---|
| PRICE | $87.75 | 1 MTH RELATIVE TO FTSE ALL-SHARE | 0.6%* |
| SIZE OF FUND | $2,388,606,259.09 | 3 MTH RELATIVE TO FTSE ALL-SHARE | -2.8%* |
| LAUNCH DATE | 24 Apr 07 | 1 YEAR RELATIVE TO FTSE ALL-SHARE | 35.1%* |
| INDEX | Gold spot (London PM Fixing) | MANAGEMENT FEE | 0.39% |
| LEGAL STRUCTURE | ETC, zero coupon bond | YIELD | na |
| BASE CURRENCY | US$ | MORE DETAILS | etfsecurities.com |
Source: ETF Securities & Datastream*
| Performance of the benchmark Precious Metal spot price as at 31/03/09 (annual compound return) | |
|---|---|
| 6 MONTHS | 5.55% |
| 1 YEAR (per annum) | 0.25% |
| 5 YEARS (per annum) | 16.60% |
| 10 YEARS (per annum) | 12.62% |
Source: ETF Securities
