Figures this week from asset management firm Invesco show that investors in Europe own more listed gold products than at any time in the past.
Holdings at the end of March were roughly double the amount they were at the end of 2015 when the gold price was at a decade low of $1,050 per ounce.
In the last three months investors have piled another $1.4bn into European gold exchange-traded products with Invesco’s Physical Gold certificate capturing more than a third of the inflows.
CLASSIC ‘DEFENSIVE’ ASSET
Chris Mellor, head of EMEA ETF Equity and Commodity Products at Invesco, says ‘gold is often used for portfolio diversification due to its low correlation with equities, and it appeals to investors wanting to take a more defensive stance during times of market stress’.
After the collapse of the tech bubble in the early 2000s and the global financial crisis in 2008, gold performed well as investors sought refuge from falling stock markets.
Last year, while markets globally struggled, gold was one of the best-performing assets in sterling terms. During the rout in stocks in the final quarter, gold rallied from $1,180 to $1,280, and in February it touched a high of $1,340.
As markets become more volatile on fears over trade tensions, slowing growth and Brexit uncertainty, it seems that investors are keen to find ways to hedge their bets.
Invesco says it has seen steady inflows into its Physical Gold certificate this year from private banks and wealth managers across Europe.
INSIDERS ARE ALSO BUYING
Long-term investors like Warren Buffett are critical of gold as an asset class on the basis that it has little practical use - unlike silver - and it has no yield, unlike stocks which compensate you during hard times with dividends.
However it isn’t just professional and retail investors who are buying gold assets.
This year has seen two big mergers with American producer Barrick Gold taking over former FTSE 100 member Randgold Resources (RAND) and Newmont Mining swooping on Canada’s Gold Corp to create the world’s largest gold miner.
Curiously, despite all this buying, the price of physical gold is still lower than it was a year ago. That may be partly due to the strength of the US dollar which makes gold and other commodities quoted in dollars more expensive for overseas buyers.
