ETF provider Source has reported a sharp increase in demand for physical gold, with the group’s Physical Gold ETC reporting US$500m (€458.7m) in inflows in the week preceding the US presidential elections alone.
Chris Mellor, executive director, Equities Product Management at Source, comments on the trend: “Markets may have been wrong-footed by Donald Trump’s victory but investors in Source Physical Gold were clearly taking out insurance against market volatility in the run up to the US elections.
Markets responded swiftly to the election results, with the Bullion Vault price of gold quickly shooting up from US$40.8 per kg to US$42.8 per kg. However, by the end of the trading day, gold prices stabilised at US$40.9 per kg, almost at pre-election levels.
Nevertheless, Source anticipates that the persistence of geopolitical risk factors will continue to affect demand for physical gold, as Mellor argues. “It is likely there will be further uncertainty around the Italian referendum early next month and French and German elections next year. That is before we even consider what will happen in the US in the coming months and years. In such an environment, the advantages of a large, liquid and low cost product are very attractive” he stresses.