Investors flock to gold ETFs

Billions have flowed into the funds amid renewed anxiety over slowing global growth and a flare-up in trade tensions.

  • By Jessica Menton,
  • The Wall Street Journal
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Gold exchange-traded funds are regaining their luster.

Investors poured about $2.6 billion into gold-backed ETFs in July, increasing their collective holdings to 2,600 tons—the highest total since March 2013, data from the World Gold Council show.

The price of the precious metal has surged 18% over the past three months and recently eclipsed $1,500 a troy ounce for the first time in six years. Investors have flocked to haven assets, like gold, amid renewed anxiety over slowing global growth and a flare-up in trade tensions.

The rally has also come as the Federal Reserve shifted its policy stance and cut interest rates for the first time in a decade. Expectations of lower borrowing costs tend to boost gold, which struggles to compete with yield-bearing assets when rates rise.

Investors are continuing to flock to the funds. About $2 billion has flowed into the SPDR Gold Trust (GLD) —the world’s largest gold ETF—over the past month, accounting for more than two-thirds of its total inflows in 2019, according to FactSet.

They put an additional $924 million into the iShares Gold Trust (IAU) in that span, representing more than half of its 2019 inflows.

Both ETFs have gained more than 7.5% apiece over the past month, versus gold’s 7.3% rally and the S&P 500’s (.SPX) 3.8% decline.

Some analysts and investors expect gold to continue moving higher in the near term, as investors use it as a hedge against economic uncertainty. The price slipped 0.5% Friday to $1,512.50 a troy ounce, after hitting its highest level since April 2013 a day earlier.

This has been one of the best environments for gold in the past half decade,” said Ryan Giannotto, director of research at GraniteShares. “Lower rates, coupled with uncertainty surrounding Fed policy, is going to continue to be a positive for gold beyond the immediate future.”

Shares of smaller gold miners may offer more opportunities for investors compared with their larger counterparts, which are trading close to fair values, according to analysts at JPMorgan Chase & Co. The firm raised its price targets this week on Agnico Eagle Mines Ltd. (AEM), Eldorado Gold Corp. (EGO), Franco-Nevada Corp. (FNV) and NovaGold Resources Inc. (NG) Each of those stocks have rallied at least 11% since mid-July.

Larger counterpart Barrick Gold Corp. (GOLD) has also fared well, climbing 16% in that span.

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