Nervousness in markets often prompts investors to consider allocating to gold and precious metals or increasing their existing exposure.
There is good reason for this as these assets often act as safe havens, meaning they can help to diversify a portfolio of bonds and equities. This year has seen few market ruptures but investors have returned to gold regardless.
Chris Mellor, executive director, product management at Source ETF, observes: “While the risk-on move in markets in November and December coincided with gold outflows, investors have come back in aggressively in 2017. As geopolitical risks continue to worry politicians and investors alike, we fully expect gold flows to continue.”
Mr Mellor says events in 2016 explain why the appetite for gold is growing.
“Last year’s key drivers were market volatility, the shock of the Brexit vote and the uncertainty in the run-up to the US presidential election,” he explains. “Political and economic fears continue to worry investors in 2017.”
The Source Physical Gold exchange-traded fund (ETF) has seen more than half a billion dollars of inflows since the start of 2017 and over $2bn since the start of last year.
Another reason for increased flows into gold and precious metals may be because there are now more ways in which investors can access these investments.
The World Gold Council’s John Mulligan acknowledges this can vary from buying gold in physical form such as bars and coins, to getting exposure through gold ETFs that are listed on a stock exchange.
Source: Financial Times Advisor