Their low costs and liquidity make gold ETCs attractive to investors.

In a record-breaking March quarter, gold ETF holdings and assets added US$ 3 billion in net inflows, the largest quarterly gain in history. This is according to data from the World Gold Council. Over the past year, gold ETFs have boosted their AUM by 57%, the highest annual increase since the GFC. One beneficiary from this craze for the precious metal was the Invesco Physical Gold ETC. (wealthadviser)

Invesco Physical Gold ETC (LON: SGLD)

The Invesco Physical Gold ETC touched an AUM of US$10 billion for the first time in its 10-year history. This was after record inflows into the ETC in the first quarter of 2020.

Total returns of the ETC are 19.77% YTD, and 39.25% over 1 year.

Chris Mellor, Head of ETF Equity and Commodity Product Management at Invesco, says: “Investors are using ETCs to allocate to gold due to their liquidity and low costs – even at a time of abnormal market stress, record spreads, and when traditional physical trading routes and infrastructures are being restricted or even shut. Indeed, ETCs have weathered the quarter extremely well and delivered exceptional value for investors at a time of profound volatility and market disruption.”

“Gold has been shown to be a safer store of value during the recent market turmoil than most other assets, and demand from investors has continued to grow. We expect this demand to continue in the foreseeable future as investors seek to capitalize on the benefits of ETCs to rebalance portfolios and reflect the market environment,” he added.

Macro-factors working in favor of the yellow metal

• Low interest rates make it easy to justify gold purchases
• Gold is a safe-haven purchase in the current time of economic turmoil from the corona crisis
• Gold does well when central banks unleash a torrent of liquidity through stimulus packages
• It is a liquid asset that can convert to cash at any time
• The yellow metal gains in value during hyperinflation and currency depreciation
• It is now longer necessary to hold it in physical form. Several ETFs/ETCs allow you to invest in the precious metal in an electronic, exchange-traded form

In a somewhat prophetic LinkedIn post in July 2019, Ray Dalio chief of Bridgewater Associates warned of a “paradigm shift.”

“In paradigm shifts, most people get caught overextended doing something overly popular and get really hurt,” Dalio wrote. “On the other hand, if you’re astute enough to understand these shifts, you can navigate them well or at least protect yourself against them.”

He predicted that another such shift was around the corner.

“I believe that it would be both risk-reducing and return-enhancing to consider adding gold to one’s portfolio,” he said.

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