Gold industry going towards an inflextion point, Boost ETP warns

Despite record inflows, the gold industry may be approaching an inflection point, according to data released by Boost ETP.

Since August 2011, gold price has fallen by 15%. However, data shows that gold flows continued, increasing by approximately 18% to a record high 87.2 Moz between August 2011 and November 2012.

As a result of sideways trending gold prices over the past two years and also falling volatility, leveraged and short gold ETPs have been coming to market.

Ten years after the launch of the first ETP, there are now 124 gold products listed on 35 stock exchanges around the world, providing investors with a wide variety of gold ETPs including physical, currency hedged (including AUD, CHF, GBP, EUR), leverage and short.

This allows investors access to a large number of gold investment strategies including: direct exposure to gold, trade gold versus gold miners, gold versus equities, gold as portfolio insurance, gold versus USD and gold as an asset allocation, to name a few of the most popular trades.

With $130 bn in assets, gold ETPs make up around 7% of the global ETP market which is high relative to average portfolio allocations.

As a result, investors looking to profit from gold have been increasing their use of leverage and short ETPs which now provide investors with up to 3x the daily change in the gold price.

“The gold ETP changed gold investing as we knew it, allowing investors to “own” physical gold bullion, and to trade this through their mobile phone and brokerage account. Gold could now be traded like an equity. From this successful product, the Exchange Traded Commodity (ETC) industry was born and which has grown to around $200 bn globally.” said Nik Bienkowski, Co- chief executive of BOOST ETP.

He added: “With falling volatility and sideways trending markets in equities and gold, investors have been demanding ways to increase volatility and potential returns through leverage and short ETPs. As a result, we recently listed 28 3x leverage and 3x short ETPs tracking gold and other liquid indices.”

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