European ETP jumps a record high

ETP records 1121.4t in Q1 2019

Since the start of 2016, assets in European gold-backed exchange traded products (ETPs) have grown rapidly, hitting a record high of 1,121.4t (US$48bn) in Q1 2019. Now accounting for 45% of the global gold-backed ETP market, they have transformed gold investment in Europe. This update summarises the growth in AUM since 2016, the factors behind it, and the outlook for European gold-backed ETPs.

Stellar growth since 2016: 

Since their emergence in 2003, gold-backed ETPs (exchange-traded products) have transformed the European gold investment market. At the end of 2012, when the gold price hit a record high around €1,400/oz, assets under management (AUM) were just shy of 1,000t (~US$50bn).

After falling back between 2012-2015, as the gold price came off its highs, inflows into European gold-backed ETPs surged by an annual record of 281t in 2016. The value-eroding negative yield environment, as well as spate of political worries, not least around Brexit, underpinned the flight to gold.

This positive momentum has proven to be long-lasting. Significant inflows of 149.7t (US$6.1bn) and 96.8t (US$3.9bn) were recorded in 2017 and 2018 respectively. AUM in European gold-backed ETPs grew to 2,440.9t by the end of 2018, hitting multiple record highs in the process. They now account for 45% of global AUM.

Investors face uncertainty:

There are three broad factors which explain this surge in demand for gold-backed ETPs in Europe:

1: Loose monetary policy and negative yields. The warning lights have been flashing for some time: the global and European economy is slowing.

2: Geopolitical uncertainty. Political uncertainty across the continent is also front and centre of investors’ minds.

3: Financial market performance and volatility. Over the past three years, European equity market performance has significantly lagged that of other major western markets looking ahead; it’s likely these factors will underpin demand in 2019 and beyond.