Physical Gold Monthly Report | August
- Low interest rates, expectations of inflation, hedging against other
stocks, and price momentum have shaped gold’s July performance
- Gold reached a record intraday high of $1,983.36 per troy ounce on 31st
July 2020 
- Adjusted for inflation, recent gold prices are still well below the
levels reached in 1980 (c.$2,800) and 2011 (c.$2,100) 
- Holdings in gold-backed exchange-traded products reached new highs
despite an overall fall in global gold demand
Monthly Performance of Fund/Sector
- The London Bullion Market Association (LBMA) PM gold price ranged
between $1,771.05 per troy ounce on 1st
July and $1,964.90 on 31st July, increasing
- At the end of July, The
Royal Mint Physical Gold ETC Securities stands at just under $350m of assets under
management. AUM in USD terms grew 24% in July.
Past performance is no guarantee of future performance.
based off LBMA PM Gold Price
Source: Bloomberg, HANetf
*July figures based on 01.07.20 – 31.07.20
**YTD figures based on 01.01.20 - 31.07.20
***12 Month figures based on 30.06.19 -31.07.20
Has Driven This Performance?
With low interest rates
and 10-year UK government bond yields hitting an all-time low at the end of
July, the perceived ‘opportunity cost’ of holding an asset like gold has been
As both asset classes
have a reputation for ‘wealth protection’ and therefore often perform a similar
role in investment portfolios, investors have been increasing their allocations
to gold, sometimes at the expense of bonds and gilts.
The attempts of multiple
governments and central banks to lessen the economic impact of coronavirus
through large fiscal stimulus packages and quantitative easing have led some
investors to increase their exposure to gold. Historically, gold has performed well
during inflationary periods and its annual price growth since the end of the
Bretton Woods system in 1971 has actually outpaced the UK consumer price index.
This strategy of using gold to hedge against inflation is likely to have
contributed to the large inflows into gold-backed exchange-traded products that
we have seen throughout 2020, and continued in July.
However, it is not just
inflation that investors have been seeking to hedge against. Some fear that
fiscal stimulus packages are the driving force behind recent stock market
rallies and have sought to take advantage of gold’s reputation as a ‘safe-haven
asset’ that historically has a negative correlation with other stocks. This
form of risk-hedging has also likely contributed to gold’s impressive gains.
The pace and extent of
gold’s gains has also attracted some investors keen to capitalise on the price
Past performance is not an
indicator for future results and should not be the sole factor of consideration
when selecting a product.
Source: LBMA / HANetf, data as of
and Coin Investment
World Gold Council data showing an 11% drop in demand for gold bars and
coins in USD terms in the second quarter of 2020 masks stark regional
differences. Global supply chains were disrupted and many retailers
experienced stock shortages. Bar and coin demand in Asia dropped as access to
retail stores and high prices made accessing gold in this traditional form
difficult. Others were deterred by current gold prices and falling income, or took
advantage of high prices to raise cash. Western markets such as the US, UK and
Germany appear to still be experiencing high demand. US bar and coin demand in
USD terms for the period April-July 2020 was up over 400% year on year.
The Royal Mint’s own gold bullion bar and coin business saw an uplift in sales
of over 160% when compared to July 2019.
Gold jewellery usually accounts for around half of all global gold
demand. Recently published data by the World Gold Council shows that while
investment demand in the quarter to June 2020 was up 158% in USD terms,
jewellery demand was down significantly, with jewellery demand accounting for
just 25% of all gold demand in the quarter. In the major markets of
China and India, jewellery retailers are hoping that delayed weddings and a
good monsoon season in India will buoy demand later in the year.
Despite disruption in the physical markets, the gold price continued to
rise in this period as investors continued to be attracted by gold’s
fundamentals in an uncertain economic environment.
price growth remained on an upward trajectory and amounted to around $200 per
troy ounce in July, gold failed to break the $2,000 barrier. It remains to be
seen whether this will be reached over the next few months, what effect
breaching this psychological barrier could have, and whether gold can climb
further, but analysts are watching closely.
Events in the US may
have a bearing on the gold price in the coming weeks. The Federal Reserve has
stated that it is ready to do more to support the US economy, but Congress
appears divided on fiscal policy, and the number of new coronavirus infections
Royal Mint Physical Gold ETC Securities (RMAU) is designed to offer investors
an effective way to access the gold market as it tracks the spot price of
is the first financial product to be sponsored by The Royal Mint and the first
gold ETC custodied with a European Sovereign Mint.
ETC is backed by London Bullion Market Association (LBMA) Good Delivery bars
held on a segregated basis. The gold
will be stored and guarded in The Royal Mint's highly secure vault in
value of your investment may go down as well as up and past performance is no
indication of future performance. Your capital is at risk.
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