Gold-backed ETFs and similar products added 52 tons of gold in July, in addition to the 125 tons added in June, increasing their collective holdings to 2,600 tons – a level not seen since March 2013. ETFs are preferred by many institutional and large investors, while smaller investors (and some large investors) like to buy physical gold and take delivery of it. (While owners of ETFs have the “right” to take delivery of the gold underlying their shares, few do.)
ETFs in the United States dominated July’s flows, adding 43 tons. Purchases of ETFs were prompted by a brewing trade war between the US and China, and by signs of a weakening economy.
Despite a stronger US dollar in July, the price of gold marched higher. Worth noting is that it reached all-time highs in many currencies, including the Indian rupee, Australian dollar, Canadian dollar, British pound and Japanese yen.
Other indications of renewed bullishness for gold include a “net longs” position on the COMEX at 850 tons throughout July, and global gold trade volumes averaged $166 billion a day – almost 50% above their 2018 levels – through over-the-counter products, futures contracts and ETFs. Further, the put/call skew indicates that investors are willing to pay more for the option to buy gold in the future than to sell it.