ETF Securities still expects growing markets for gold investment products

25th March 2013

The chairman of ETF Securities Graham Tuckwell is predicting good prospects for gold investment driven untapped demand for gold-based investment products in Asia and increasing awareness in parts of Europe.

The firm launched its first Exchange Traded Product in Australia a decade ago.

Tuckwell says: “Ten years ago, you heard about gold, people talked and got emotional about it, but you couldn’t buy it readily. It is widely acknowledged that the launch of gold ETPs has had a very significant impact on the gold market and is now a key part of it. We have witnessed a decade of growth, and despite some predicting the end of the gold bull market, I think the next decade has a lot more to go.”

“Untapped demand from China and other parts of Asia will be one of the biggest factors to drive product development and broaden access. While the larger investors in these markets can already buy gold ETPs on other exchanges, smaller investors want to buy on their local exchange. Currently, these products are not widely available in these regions, and the demand is growing.”

“The second change that will occur is greater investment by retail investors in the Western world. The European retail market lags some way behind the US, where there is already a strong level of demand for gold ETPs from retail investors. One of the biggest barriers in Europe is access, but developments to distribution models and further education on the investment vehicle mean that we will start to see greater demand for these products.”

ETF Securities Head of Investment Strategy, Nicholas Brooks, says he doesn’t believe the recent sell-off reflects a U-turn in investor attitudes.

“Most of the current selling is by investors with shorter-term tactical views. However strategic investors in gold are continuing to hold tight. They see gold as a longer-term hedge against currency debasement, diversification and insurance against worst case economic scenarios, and some are starting to think about increasing allocations following the recent price declines,” he adds.

“With net speculative longs in the futures market now back at end-2008 levels and the continued high risk of negative sovereign risk events in Europe, I wouldn’t be surprised to see a turn in gold ETP inflows in the coming weeks or months.”

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