Brexit boost for Gold ETFs

Amidst the search for safe havens following the impact of the Brexit referendum, price spreads for ETF’s going long on gold prices have increased sharply , with the € denominated performance of some funds exceeding 30% since the beginning of June.

According to FE data, leveraged ETFs such as the € denominated  ETFS x2 Daily Long USD Precious Metals or the ETFS 2X Daily Long Gold USD in € reaped the biggest gains with pricing spreads rising by 33.67% and 26.13% respectively.

However, even non-leveraged ETF’s such as the Invesco Power Shares Global Gold and Precious Metals Portfolio TR in EUR increased by 32.39% since the beginning of June.

Meanwhile even ETFs going short on the gold price were not the worst bet, they returned between -10.53% and -13.12%, compared to the FTSE 350 Financial Services Index, which returned -17.84 throughout the same period.

Gold ETFs Brexit effect

The performance of passive gold funds reflects the sharp price increase of physical gold, on 24 June, the Bullion Vault price shot up from €35.5 per kilo to €39.13 per kilo, it is currently at €39.44 per kilo.

According to BlackRock, investors placed $2.5bn (€2.26bn) of assets into gold exposures in the week following Brexit, with total inflows for June adding up to $5.4bn (€4.9bn).

Ursula Marchioni, chief strategist, iShares EMEA at BlackRock comments: “June flows have been mixed, demonstrating an absence of consensus amongst investors. Flows looked to be very tactical with risk sentiment shifting on to off to back on from day to day, especially when it comes to broad European exposures.

“The performer of the year still continues to be gold, with gold based ETPs accumulating $5.4bn (€4.bn) in June, and $22bn (€19.9bn) for the year so far. Investors are seeing this as increasingly opportune given its negative correlation to global equities, and an attractive source of diversification.”

 

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