Gold Demand Increases 15pc

December 14, 2012 at 08:53

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Demand for gold has continued to grow in 2012 and is predicted to increase further next year.

Research by Source, a provider of exchange traded products, shows that inflows into European gold ETPs have reached $6.8bn this year to date, constituting a staggering 15.4pc growth.

ETPs are funds that are traded on a stock exchange like shares. They are a pooled investment fund, where an individual can gain exposure to a particular indices or commodity, providing the investor with the same returns as the underlying market.

Total gold ETP assets have now reached $44.2bn, in a year when the gold price has increased by 9pc and ranged from $1,540 to $1,790 per ounce.

The strong performance of gold ETPs is indicative of a positive performance of ETPs in general this year. Inflows for the first half of 2012 were the largest ever for the global ETP industry. ETPs attracted net new assets of more than $100bn during the first half of 2012, and this has increased to $218bn this year to date, with particularly strong demand for exposure to income-producing assets.

Dodd Kittsley, head of ETP research for BlackRock, said: “The ETP industry continues to gather new assets from investors around the world, who are attracted by the efficient market access ETPs can offer. Demand for exposure to fixed income assets has been a key theme for the last year and shows no sign of abating, as acceptance of the value of an indexed approach to fixed income investing gains increasing traction amongst investors.”

Willem Sels, UK Head of Investment Strategy for HSBC said that the gold price should rise next year.

“Gold should find support as it tends to benefit from a weak US dollar and it cannot be diluted by ‘money printing’. Moreover, the absence of yield or income on gold has become less of an issue, as yields are negligible on sovereign bonds and cash,” he said.