Gold ETFs reserves, whose shares are backed by the physical precious metal, increased to a record size during the month of February. According to the World Gold Council (WGC), total investments in gold ETFs worldwide have reached $157 billion.
The WGC reports that the reserves of physical gold held by ETFs now amount to 3032.9 tons. This is a new record, corresponding to circa $157 billion. The funds regularly purchase physical gold to back their shares. In February 2020, the reserves increased by 84.5 tons, corresponding to a net capital flow of $4.9 billion.
Most of this capital went towards gold ETFs in North America, where the world's largest fund SPDR Gold Trust (ticker: GLD) is based. Since the beginning of 2020, the fund increased its reserves by 41 tons. As of late February, its total holdings amounted to 934 tons. Overall, North American ETFs now hold a total of 1511.9 tons of gold.
The German fund Xetra-Gold also managed to significantly grow its reserves. Reports indicate that at the end of February 2020, it held 206.8 tons of the precious metal. According to the WGC, the reserves of European ETFs have reached 1387.9 tons, distributed as follows: the UK (615 tons), Germany (377.4 tons), Switzerland (347.1 tons), and France (29.1 tons). Lastly, Chinese ETFs report a total of 47.2 tons of gold held in reserve.
It's worth reminding that back in 2011, during the previous record price surge, the demand generated by gold ETFs spurred an increase in gold prices. On December 6, 2012, SPDR Gold Trust registered a new record amount of gold in its reserve. In the past few years, investments in ETF funds have become ever more popular amongst investors, since they provide quick and easy exposure to gold through their shares.
Gold investors should always remember that ETF shares are paper gold. It's very rare that an investor demands for the physical gold to be delivered. It is possible, but generally too costly in practice. Therefore, when making a long-term investment with a horizon of several years, it's better to buy actual physical gold in coins and bars and keep it accessible; therefore, one can easily sell it if necessary.
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