The Royal Mint plans to launch its first gold exchange traded fund in response to rising demand from investors that has pushed holdings in bullion-backed ETFs close to a record.
The Royal Mint already sells a range of precious metal coins and bars, but the launch marks the first time in its more than 1,100-year history that it has offered a financial product that will trade on a stock exchange. It will be structured as an exchange traded commodity (ETC), a debt security backed by gold stored in the Royal Mint’s vault.
“Gold has been recognised as the ultimate means of trading and storing wealth for thousands of years,” said Anne Jessopp, the Royal Mint’s chief executive.
HANetf, a specialist London-based boutique that helps build ETFs, has worked with the Royal Mint to develop the new ETC, which is expected to list in the UK, Italy and Germany early next year. Details of fees and charges will be announced at a later date.
The price of gold has risen 18 per cent this year, breaking above $1,550 an ounce this month for the first time since April 2013. Fears that the trade war between the US and China could drag the global economy into a recession have spurred demand for gold. The appeal of gold has also been enhanced by developments in fixed income markets, where bonds worth $17tn are trading with negative yields.
Investors have ploughed just over $14bn this year into gold-backed ETFs and similar products, taking the value of these assets to $134.3bn at the end of August.
Holdings in gold ETFs have risen by 292.2 tonnes this year to 2,733 tonnes, just 2 per cent below the peak of 2,791 tonnes reached in late 2012, according to the World Gold Council.
James Steel, chief precious metals analyst at HSBC, said expectations that the US Federal Reserve and other central banks would cut interest rates had boosted the gold price.
“The majority of the gold rally in 2019 has been due to the unexpected Fed pivot early in January and then the significant pricing in of interest rates cuts over the year ahead,” said Mr Steel.
Capital Economics, the London consultancy, said that the rally for the gold price was nearing exhaustion.
“We forecast that gold will drop to $1,350 an ounce by the end of 2020 when it becomes clear that the degree of monetary stimulus that investors are expecting in the US and elsewhere will not materialise,” said Simona Gambarini, an analyst at Capital Economics.
Mr Steel said that US monetary policy was “only one influence” on gold.
“Factors such as the strong US dollar could weigh on gold while an intensification of trade or geopolitical risks would tend to support prices,” he said.