Gold Demand Climbs 3% in Third Quarter

Gold demand continues to climb as overall global purchases rose 3% in the third quarter, the World Gold Council reported.

Global central banks still show an insatiable appetite for physical gold and have already bought 547.5 tonnes (t) in 2019, which is 12% more than last year’s record level.

A massive surge of investment-related gold purchases for exchange traded funds (ETFs) was the main factor driving gold demand higher last quarter, as funds bought 257t of the yellow metal. Gold-backed ETF holdings soared to a record high in September of 2,855 t, representing $136 billion in gold investments.

This shows that investors around the globe crave the diversification that gold offers for your portfolio.

What’s Better? Gold Backed ETFs or Physical Gold

Given these numbers, it’s worth considering why physical gold purchases offer more portfolio protection than an ETF. When investors buy gold-backed ETFs, this form of diversification is more risky than owning physical gold, like a 1 ounce American Gold Eagle coin seen here.

For starters, ETFs do not always follow the price of gold.  There are sometimes outside forces at play that can move the price of paper investments at different rates and in different directions than the spot price of gold. 

ETFs also come with their own set of unique issues, including management fees, marketing fees and storage and insurance fees.  Most notably, investors putting money into ETFs also do not take possession of the gold they’ve invested in and most funds do not allow you to ever take physical ownership. An ETF is a paper investment, which is very different than owning an actual tangible asset that you can touch, hold in your hands and feel the weight and see the beauty of your investment.

It’s a good idea for an investor considering an ETF to read the prospectus to make sure the gold will always be held by the custodian.

Physical gold does not have these same downsides.  When you invest and own physical gold, you are purchasing an investment that has the power to store and grow your wealth. Just look at the plethora of negative interest rate bonds around the globe right now. A negative interest rate bond is an investment that returns 98 cents on the dollar; you lose money just by buying it.

Gold Rose 5% in the Third Quarter

Spot gold price surged to new six-year high in the third quarter.

“The primary factors behind this price momentum continued to be ongoing geopolitical tensions, concerns of a slowdown in economic growth, lower interest rates and the level of negative yielding debt”, the WGC said.

Current Pullback in Gold Offers Investors an Excellent Buying Opportunity

The current retreat below $1,500 an ounce offers investors an opportunity to accumulate physical gold at a better price than last month. See the spot gold chart here and take advantage of this dip to purchase gold at a better price now.