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19 May, 2020 16:09

Paper gold trade is now bigger than ALL of Germany’s reserves

Paper gold trade is now bigger than ALL of Germany’s reserves

The price of gold exchange-traded funds (ETFs) steadied on Tuesday at the equivalent of $1,733 per ounce after retreating on the news of a potential coronavirus vaccine by drug maker Moderna.

Gold ETFs are not equal to physical gold, as they are simply securities backed by the commodity designed to track the gold price.

Gold bullion, which hit an eight-year high just before the news, lost $40 per ounce for US dollar traders by the start of Tuesday’s London trade. It has also dropped over two percent from new all-time highs in British pound and euro currency terms.

“Gold sold off on upbeat trader attitudes after the Moderna news of a positive initial result from a Covid-19 vaccine test,” Jim Wyckoff, senior analyst at Kitco.com, told MarketWatch.

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According to John Reade, a strategist at the mining industry's World Gold Council, with the euro gold price falling back below €1,600, European-listed funds were “responsible for the lion's share of inflows into gold-backed ETFs.”

He told BullionVault that month-to-date in contrast, “US-listed funds buying has dominated so far in May as was the case in April.”

Rhona O'Connell from brokers INTL FCStone explained that “If gold ETFs were a central bank, they would now be the second-largest holder in the world, having overtaken Germany.”

Germany, which is the Eurozone's largest economy, is second only to the United States among sovereign gold holders. According to Germany’s Bundesbank, 3,364 tons of the metal are split between Frankfurt, London and New York.

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World Gold Council data now puts the quantity of bullion held to back exchange-traded products for investors wanting exposure to gold prices above that level.

“With the exception of one day ( April 23), the gold ETFs have now enjoyed 40 consecutive days of gold ETF creations,” O'Connell wrote on Monday, “for a net addition of 341 tons.”

That demand equals two-thirds of world gold mine production since New Year and comes “in the face of virtually zero demand from the Middle East and Asia, which – on average over 2010-2018 inclusive – accounted for 74 percent of gold fabrication demand.”

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