Physical gold ETCs see inflows of $200m last week, the 4th biggest week in the past 12 months;Physical gold ETCs now total $4.7 billion or 5.4 Moz;Record trading on Germany’s Xetra for ETFS Physical Gold; Short ETCs outperform but ETFS Physical Gold up 8.7% last week….
ETF Securities Limited, continued to experience large inflows into physically backed gold ETCs last week as investors sought safe haven assets. Physically backed gold ETCs saw net inflows of $200 million, the largest weekly increase during the past 14 weeks and the fourth largest increase in the past twelve months. Silver also saw net inflows.
With the global financial markets continuing amid heightened volatility, physically backed gold ETCs have benefited from the market’s desire to reduce risk and seek safe haven assets. Physically backed gold ETCs are backed by allocated 400oz gold bars which carry no credit risk. As a result, ETFS Physical gold (PHAU) and Gold Bullion Securities (GBS) have seen large daily net inflows as investors seek safe haven assets during the current financial crisis. Not only do physical gold ETCs carry no credit risk, gold is also uncorrelated to equities, thereby providing diversified portfolios some protection during volatile markets.
Last week, physical gold ETCs experienced inflows of $200 million or 232,000 ounces. This was the fourth largest weekly inflow in the past twelve months. Bucking a fall in gold prices the previous week, precious metals were the best performing commodity sector last week with gold up 8.7% and silver up 4.8%. PHAU and GBS’ total assets reached 5.4 million ounces or $4.7 billion. Since 1 January 2008, physically backed gold ETCs experienced inflows of approximately $1.5 billion or 1.8 million ounces, an increase of 50%.
ETFS Physical Silver (PHAG) also experienced net inflows of $4 million last week. Over the past six weeks, the amount of silver has increased by 25% to 12.8 million ounces, the highest since 30 January 2008. Total assets for PHAG now stand at $147 million.
All of the physical precious metal ETCs are backed by allocated metal – uniquely identifiable bars which carry no bank credit risk. These precious metal bars and ingots are held in trust in London by the Custodian HSBC Bank USA N.A., the world’s leading Custodian for ETCs. The metal held with the Custodian must conform to the rules for Good Delivery of the London Bullion Market Association (LBMA) and London Platinum Palladium Market (LPPM). Securities are only issued once metal is confirmed as being deposited into the Company’s bullion account with the Custodian. Consistent with allocated gold, no precious metal is borrowed, loaned out and thus does not earn any income.
Last week, gold ETCs continued to lead ETC trading volumes with $670 million traded, a 66% share of total ETC volume in Europe. Volumes for physically backed ETCs have been increasing across all European exchanges over the past few weeks. In particular, ETFS Physical Gold (PHAU) traded 900,000 securities (89,500 oz or $77 million) over the past six days on Deutsche Bourse’s Xetra platform. PHAU also traded 170,000 (16,900 oz or $15 million) on Borsa Italiana’s ETFplus Markets. ETCs are also listed on Euronext’s Amsterdam and Paris stock exchanges.
Recently, ETF Securities also obtained a Sharia certificate from Al Qalam making 5 of the physically backed ETCs, including ETFS Physical Gold, Shariah compliant.
During the recent financial turmoil, one range of ETCs has outperformed – Short ETCs. Short industrial metals ETCs including ETFS Short Industrial Metals (SIME), ETFS Short Nickel (SNIK) and ETFS Short Copper (SCOP) were all up 13.6% to 22.6% last week. ETFS Short Crude Oil (SOIL) was also up 17.8% last week. SOIL has been the most popular Short ETC and was the most traded ETF/ETC on the London Stock Exchange (LSE) in August 2008, trading $650 million in one week, 50% more than the FTSE 100 ETF. Recently, ETF Securities announced that AIG Financial Products Corp, which provides the commodity exposure to some Commodity Securities including all 33 Short ETCs, will shortly provide collateral covering not less than 100% of the daily mark-to-market value of all Commodity Securities in issue.
