The price boom has also benefited the big banks – notably JPMorgan and HSBC – which hold gold and silver on behalf of ETFs in their vaults
The incredible rally of gold in 2020, has triggered a massive wave in the market, with investors not only seeing an opportunity to make a profit from a position that traditionally pays little to nothing. The precious metal is considered a safe haven in times of turbulence and in the midst of the recession caused by the coronavirus pandemic, there was a massive shift to gold, which during the current year and until the beginning of August recorded an impressive rise of almost 27%.
Large-scale gold purchases and placements led to redistributions in the gold market and stockpiling. On this basis, the champions are the Exchange Traded Funds (ETFs) and especially those that have the largest exposure in gold and silver. These funds accumulated more than $ 50 billion by 2020, now holding the most gold in value of any central bank, with the exception of the US Federal Reserve.
This accumulation has generated huge profits for ETFs as well as for anyone involved in the gold market, including stockbrokers who place their clients’ funds in funds, as well as banks and security companies responsible for storing gold and silver worth hundreds of billion dollars in London.
“Right now is a very good market to participate in,” said George Milling-Stanley, chief strategist at State Street Global Advisors, the marketing company for the largest ETF, SPDR Gold Shares, or GLD. “There is no doubt that demand for gold is driven by ETFs.”
ETFs typically charge a percentage of the value of their assets. With investors increasing their stakes as the spot price hit a record high of $ 2,075 an ounce earlier this month, profits soared.
Total charges for the top 10 gold ETFs, based on current prices, are about $ 610 million a year, according to Bloomberg News, while for the top 5 ETFs with silver exposure, the amount is almost $ 110 million. Investors have bought more silver through ETFs in the first eight months of this year than were the 10 largest mining companies in the world produced last year. The GLD earns nearly $ 300 million from the European Investment Bank (EIB) a year at current prices.
The price boom has also benefited the big banks – mainly JPMorgan and HSBC – which hold gold and silver on behalf of ETFs in their vaults. For them, it is a specialized business, but as the holdings have grown in value, it has become a steady profit. GLD Gold is held in the HSBC Treasury in London.
The vault usually represents about 10% of almost $ 1.2 billion a year earned by the banks from precious metals, according to Amrit Sachani, research director of the Coalition Development, stressing that the amount “will be almost double this year.”