Pandemic and global response drove total investment to four-year high, taking global holdings to new heights
The demand for gold as a safe-haven investment was plain to see in Q1 as gold-backed ETFs saw a surge in inflows, according to the World Gold Council.
“The coronavirus pandemic – and the global response to it – had a far-reaching impact on gold investment in Q1,” the council said in a new report.
Globally, total investment in gold saw 80% year-on-year growth, reaching a four-year high of US$539.6 trillion. Bar and coin investment decreased 6% relative to the previous quarter, but that was offset by US$298 trillion in gold ETF inflows.
“[A]ssets under management (AUM) in these products increased by a record US$23bn over the quarter,” the report said, as a 10% increase in flows combined with a 6% quarterly increase in gold prices.
Holdings of gold also reached as historic high, totalling 3,186 tons by the end of the quarter.
The volatility that rocked global financial markets had also caused turbulence in gold prices, the council said. As COVID-19 tore across the planet, uncertainty over the short- and long-term economic impacts coupled with ultra-low interest rates fuelled strong safe-haven flows.
However, there was also much selling of gold holdings amid a broad-based asset liquidation that impacted even long-term U.S. Treasuries. Gold sold off by as much as 7% during March before it rebounded later in the month off the back of concerted interest rate cuts and trillions of dollars in quantitative easing and fiscal-support measures announced worldwide.
“Uncertainty around the short- and long-term economic impacts of COVID-19 continues to drive sharp volatility across many assets,” the report noted. “The first few weeks of April have seen strong inflows continuing into gold-backed ETFs, taking holdings to fresh record highs.”
