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PRESS ROOM

Record gold ETP outflows of $9.5 bn as gold ETP industry celebrates 10 year anniversary

Thursday 28th March '13

  • 54 gold ETPs hold 81 Moz gold worth $130 billion, with trading of $2bn per day
  • 6 Moz ($9.5 bn) of outflows in past 4 months, as investors retreat from record high assets
  • Gold ETPs make up 7% of global ETPs, highlighting the importance of the gold ETP to investors
  • Increase in demand for leveraged gold ETPs as gold price volatility falls by 30% over past four years   

London, 28 March 2013: The gold Exchange Traded Product (ETP) industry is celebrating its 10th anniversary today.  Gold Bullion Securities (ASX: GOLD) was the world’s first gold ETP and was first listed on the Australian Stock Exchange on 28 March 2003.  With $630 million in Assets Under Management (AUM), it is Asia-Pacific’s largest physically backed gold ETP.  There are now around 54 physical gold ETPs in the world, holding 81 Moz of gold bullion worth $130 billion, and with $2bn of trading on stock exchanges each day.  Gold ETPs would rank the fifth largest holding if it was a central bank, and in 10 years, the industry had accumulated one year’s worth of new mine production.  Gold has risen 384% since 28 March 2003 while the FTSE 100 has returned 67% (in USD) over the same period, meaning gold outperformed equities by 317% or 11.8% p.a.   

With $130 bn in assets, gold ETPs make up around 7% of the global ETP market which is high relative to average portfolio allocations.  This statistic may indicate the importance of the gold ETP to investors as a way to access the gold price.  The gold ETP made investing in gold secure, simple, cost-efficient, and extremely simple.    
 
Despite record inflows, the gold industry may currently be at an inflexion point.  Since 22 August 2011 the gold price has fallen by 15% however gold flows continued, increasing by approximately 13 Moz (18%) to a record high 87.2 Moz between 31 August 2011 and 30 November 2012. Since reaching its high, there have been record outflows of 6 Moz or ($9.5 bn) as USD strengthened and global sentiment improved.   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.  The average daily gold price move between 2006-2008 was 1.12% per day, however since then the average daily gold price move has fallen to 0.78% over the past four years (a fall of 30%), which has fallen even further to 0.60% per day in 2013.  
 
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.  For example, the Boost Gold 3x Short Daily ETP (3GOS) is up 16.7% over the past two months.   
 
Nik Bienkowski, Co-CEO of BOOST ETP commented, “Today marks the 10th anniversary of the gold ETP industry. It is a great achievement for the gold ETP industry ‘the people’s central bank’ to now be considered the fifth largest central bank in the world. In 10 years since the first gold ETP was created, gold ETPs have accumulated one year’s worth of mine production.”   
 
“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."     
 
“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.  With a robust structure, BOOST ETPs are the gold standard in ETPs.”   
 
“With what started as a single product, there are now 124 gold ETPs 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.”   
 
“ETPs have had a significant impact on the gold market since the launch of the world’s first gold ETC.  BOOST is playing a leading role in the continued success of the gold market,” said Robert Hughes, Vice President of NASDAQ OMX Global Indexes. “BOOST’s suite of successful gold ETPs, which track NASDAQ OMX’s world-class indexes, are liquid, accessible and simple. We look forward to continuing to collaborate with BOOST as we pursue our common goal of serving the needs of investors by creating indexes and products that track a variety of asset classes and regions.”   

NIK BIENKOWSKI BIO


Nik is a leading specialist in Exchange Traded Products (ETPs) with over 10 years’ experience in the sector. Nik joined a boutique firm in 2002 headed by Graham Tuckwell, where he became the third member of the team which created the world’s first gold ETP on 28 March 2003, Gold Bullion Securities. Nik then helped Mr Tuckwell found ETF Securities Limited where he helped to manage the business from incorporation to over 70 people and $22bn in AUM by October 2010. Please note: that sources for all statistics in this release are sourced from Boost ETP and Bloomberg, up to 22 March 2013