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Gold Buying Keeps On Going Despite Waning COVID Woes

The waning COVID-19 pandemic hasn’t stopped investors from piling into gold bullion so far this year.

In the six months through June they snapped up a total of 465 metric tons (almost 15 million troy ounces) of the yellow metal, worth more than $27 billion dollars, new data from the World Gold Council shows.

Bullion was recently fetching around $1,820 a troy ounce.

“The perception of risk started to come down relative to 2020 and the need for hedges was not as high,” says Juan Carlos Artigas global head of research at industry group, World Gold Council in New York. “But people still kept their gold positions.”

That lower risk assessment has come hand-in-glove with lower levels of gold buying during 2021 versus the first half of 2020, when investors snapped up 1,141 tons of bullion. That’s more than twice the level so far this year.

However, while the investment buying is lighter this year, it is still buying and not selling on a net basis. Key to that continued buying is long-term investors some of whom buy gold bars or bullion coins.

Demand for Gold Bars and Coins Surges

Investors in bars and coins made of solid gold bullion added 595 tons of the metal to their holdings this year through June. That’s up from 409 tons in the same period of 2020.

The reason for the bar and coin buying, Artigas says, is long-term investors are still concerned about the potential for paper money to get debased due to all the government spending across the globe during the pandemic. There is also concern about renewed inflation which may last longer than some commentators forecast.

“Bar and coin has increased they tend to be more long term and won’t be trading in and out,” Artigas says. “And they are worried about inflation.”

ETF Investors Ditch Some Holdings

That’s a contrast with ETF investors who shed some of their holdings so far this year, ditching 129 tons of bullion from funds such as the SPDR Gold Shares ETF (GLD)
GLD
. That compares to an inflow of 731 tons in the same period a year before.

“The largest ETFs flows are a little bit more linked to price trajectory of gold,” Artigas says. Indeed, so far this year, the price of gold has drifted down, with the SPDR Gold Shares ETF slipping more than 4%, in line with the price of bullion.

Still, on a net basis there is money piling into bullion rather than fleeing, and that augers well for a continued rally over the longer term.

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