Bullion investment: Gold ETF market to reach $100bln in a decade
Just three years ago, any small investor wanting to invest in gold had a very hard time of it. Few ordinary people have the facilities to take physical delivery of bullion, even if the asset class is the ultimate low-risk play because of gold’s inherent value.
But almost overnight, exchange-traded gold funds (ETFs) have created a revolution in bullion investment. Such is the popularity of the instrument that bullion bankers and fund managers say the gold ETF market’s capitalization, now at $10.4 billion, could reach $100 billion within a decade.
The funds, which enable small investors to buy a tenth of an ounce of gold with the same ease as buying shares but without actually taking delivery of bullion, are particularly in vogue as gold prices break through 25-year highs to reach $715 an ounce. “The development of gold ETFs is the most significant development in bullion in the past 30 years,” says John Hathaway, a senior portfolio manager at US-based Tocqueville Fund. “The market capitalization could easily reach $100 billion over the next 10 years.”
The gold ETFs, which are set up like mutual funds but trade on the London, New York, Sydney, Paris and Johannesburg stock exchanges, have put 450 tonnes of bullion in investors’ hands, equivalent to the amount held by the world’s 11th-largest central bank. Most gold ETF trading has been done in New York, with $8.1 billion invested, followed by London and Paris, which have done $1.7