"Today is the cheapest day"…ETFs also rally as gold prices soar to record highs

Korea Economic Daily

Summary

Analysts said that as gold prices surge, large-scale fund inflows into gold ETFs are continuing.
They noted that gold ETFs such as 'ACE KRX Physical Gold' posted returns that outperformed the KOSPI index and the S&P 500.
The World Gold Council (WGC) and Goldman Sachs said fund inflows via ETFs are a key driver of rising gold prices.

As gold prices surge, a wall of money is pouring into exchange-traded funds (ETFs) that invest in gold. Analysts say large-scale inflows via ETFs are underpinning the rally in gold prices.

According to ETF.com on the 26th, 'ACE KRX Physical Gold' recorded net inflows of 2.1104 trillion won over the past six months. An ETF that invests in physical gold, it ranked third in net inflows among 1,066 ETFs listed on the domestic stock market over the period. It also outpaced 'TIGER Semiconductor TOP10' (1.9580 trillion won), which holds semiconductor stocks such as Samsung Electronics. Money also flowed into 'TIGER KRX Physical Gold' (936.4 billion won), 'SOL International Gold' (94.9 billion won), 'KODEX Gold Active' (93.0 billion won) and 'KODEX Gold Futures' (90.0 billion won).

Demand for gold ETFs is surging because they are delivering returns that beat major equity markets, analysts say. 'ACE KRX Physical Gold' jumped 59.52% over six months. It outperformed not only the U.S. S&P 500 (8.25%) but also the KOSPI index (54.87%), which is posting the highest gain among major markets worldwide over the period. Returns on ETFs holding gold miners have also been soaring. 'HANARO Global Gold Mining Companies' surged 118.1% over six months, pushing net assets past 100 billion won. Gold mining stocks tend to price in commodity-price trends in advance, making them relatively volatile.

Gold ETFs are favored for allowing investors to trade conveniently like stocks through a brokerage account without needing to buy and store physical gold. They offer good liquidity and allow small-lot trading. For 'ACE KRX Physical Gold', the total expense ratio is 0.19% per year—about one-tenth the level of bank gold banking. Physical-gold-based ETFs, unlike gold futures, can also be invested in through retirement pensions, and experts say this is driving a sharp increase in inflows.

The securities industry analyzed that inflows into gold ETFs are pushing up gold prices. According to the World Gold Council (WGC), the amount that flowed in through global ETFs last year reached $89.0 billion (about 128 trillion won), the highest on record. Goldman Sachs said, "As gold's investment appeal increases, inflows through ETFs will serve as a driver of higher gold prices."

By Jin-gyu Maeng maeng@hankyung.com