Gold exchange-traded products are continuing to enjoy a revival as investors flock to so-called safe-haven assets amid volatile equity markets.

James Butterfill, Head of Research and Investment Strategy at ETF Securities.

Europe’s leading provider of gold ETPs, ETF Securities, has reported the seventh consecutive week of inflows into its gold-linked ETPs, which include the $4.3 billion ETFS Physical Gold (PHAU) and the $3.5 billion Gold Bullion Securities (GBS).

The recent spike in inflows follows a four-year period of lacklustre performance, in terms of asset flows and price return, from the precious metal.

James Butterfill, ETF Securities’ Head of Research & Investment Strategy, said: “While gold appears fairly valued according to our models, the risk of a sudden shock to cyclical markets could send gold prices considerably higher. Investors are buying into gold as an insurance asset – a hedge against what were seen as tail-risks which are now emerging. Fears over anti-establishment governments strengthening or a dislocation in financial markets are some of the concerns on investors’ minds.

“Despite a rise in the S&P 500 and a decline in option-implied equity market volatility, we continued to see inflows into gold ETPs last week, as investors focus on the shoring up of defensive positions in their portfolios. The European Central Bank’s commitment to price stability through what will likely be more rounds of quantitative easing and negative interest rates will likely be price-positive for gold. Gold serves as a hard asset store of value – a monetary asset that investors may prefer to hold instead of a currency they feel is being debased.”

Commenting on ETF Securities’ flows, Townsend Lansing, Head of ETCs, said: “We have seen over US$1 billion net inflows into our gold ETPs since the start of the year, representing 55% of all flows into European gold ETPs in 2016, with Gold Bullion Securities being the most actively traded gold ETP in Europe YTD.

“Gold has always been the foundation of our offering and we’re delighted to see that investors continue to consider ETF Securities as a leader in this space.”

ETF Securities’ physical gold ETPs PHAU and GBS are Europe’s largest by assets under management. Both are backed by physical allocated gold held at HSBC. Only metal that conforms with the London Bullion Market Association’s rules for ‘Good Delivery’ are accepted, with each physical bar segregated and individually identified and allocated.

GBS offers an additional benefit whereby investors can redeem their ETPs directly for physical gold, receiving either unallocated gold or Britannias or Sovereigns issued by The Royal Mint of Great Britain.