Gold investments attracted excessive positive inflow in 2018

Raising the relevance of gold investments, the World Gold Council today have announced a quantum of positive inflows amid Gold backed funds aligning to ‘Gold Exchange Traded Funds’ in year 2018. “With institutional and individual investors using them to implement many of their investment strategies, flows in ETFs often highlight short-term and long-term opinions and desires to holding gold.”, stated the report.

The prices of Gold have increased over the years by an average of 10% since 1971. Gold is not only useful in periods of higher uncertainty but consists of duo attributes constituting scarcity and the market size. Scarcity supports its long-term appeal and the large markets are enough to make upto variety of institutional investors like the central banks.

“Today, gold is more relevant than ever for institutional investors. While central banks in developed markets are starting to normalise monetary policies – leading to higher interest rates – we believe the effect of quantitative easing and the prolonged period of low interest rates can have a long-term effect.”, said Aram Shishmanian, CEO of the World Gold Council.

“These policies may have fundamentally altered what it means to manage portfolio risk and could extend the time needed to meet investment objectives citing profits over.”, he added further. As a strategic asset, gold has historically improved the risk-adjusted returns of portfolios, providing returns while reducing losses and providing liquidity to meet liabilities in times of market stress.

Know what is Exchange Traded Funds (ETFs) :

An ETF is a type of fund that owns underlying assets constitiuting shares of stock, bonds, oil futures, gold bullion, foreign currency and divides ownership of those assets into shares. Most ETFs are set up as an open-ended fund and are subject to the Investment Company Act of 1940.

Although similar in many ways, ETFs differ from mutual funds because shares trade like common stock on an exchange and the price of an ETF’s share keeps on changing throughout the day as they are bought and sold.

The Gold pricing and demand trends :

Gold is becoming more mainstream. Since 2001, investment demand for gold worldwide has grown 18% per year on an average and the prices rise by 10% since 1971. This has been a part of new ways to access the market, such as physical gold-backed exchange-traded funds (ETFs), but also by the expansion of the middle class in Asia resulting in the huge market inspite of the scarce quantity.

“We estimate that there are approximately 190,000t of gold above ground worth more than US$7.6 trillion. Mine production adds approximately 2,900t per year, equivalent to an annual 1.6% increment.”, Aram added.

Gold markets, set to evolve in the next 30 years:

It is estimated by the Board that the expanding middle class community in India, combined with broader economic growth between India and China, will have a significant impact on gold demand. Use of gold across energy, healthcare and technology is changing rapidly. Gold’s position as a material of choice is expected to continue and evolve over the coming decades. Also the mobile apps for gold investment, which allow individuals to buy, sell, invest and gift gold will develop rapidly in the country, stated the report.

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