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A Gold Vault in London Is Key to a $62 Billion ETF’s Success

China's ICBC buys giant London gold vault from Barclays - MINING.COMGold-backed ETFs are on pace for a record haul in a year that’s seen some funds tracking oil futures founder.

 

Investors have poured unprecedented amounts of cash into gold exchange-traded funds, with inflows totaling $16.8 billion in less than five months and set for a record year, according to data compiled by Bloomberg. State Street’s $62 billion SPDR Gold Shares, ticker GLD, has taken in nearly $12 billion in 2020, ranking it third for worldwide ETF inflows behind two equity-focused funds.

 

Gold funds are drawing a surge in interest partly because they’re backed by actual bars of the precious metal, making them better able to track the underlying assets’ spot price when markets go haywire. Compare that with the futures-backed United States Oil Fund, or USO, which was forced to take a series of unusual steps to survive amid a plunge in the crude contracts. WisdomTree suspended a swaps-based inverse oil offering in April, while Proshares Capital Markets liquidated two leveraged crude ETFs a month earlier.

 

“I would put a big line in between physically-backed commodity ETFs and the ones that use futures and have to roll them,” said Eric Balchunas, ETF analyst for Bloomberg Intelligence. “In the worst case scenario, they deliver gold to your door. That’s a different situation than a barrel of oil.”

 

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