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Gold rush 2020: ETFs now hold more yellow metal than any central bank

In the 19th century California gold rush, the surest way to a fortune, according to Mark Twain, was to be in the “pick and shovel business.”

If 2020 gold fever has an equivalent, it’s the ETF business.

Exchange-traded funds backed by physical gold and silver accumulated more than $50 billion of bullion this year. ETFs now hold more gold than every central bank with the exception of the Federal Reserve.

That’s generated windfall fees for ETFs and has been a boon for everyone involved in the business of servicing those enormous hordes of shiny metal. That includes the financial firms that provide the funds to investors, through to the banks and security firms responsible for storing hundreds of billions of dollars worth of gold and silver beneath the streets of London.

“At these times, it’s a very good business to be in,” said George Milling-Stanley, chief gold strategist at State Street Global Advisors, the marketing agent for the largest gold ETF, SPDR Gold Shares or GLD. “There’s no question in my mind that ETF demand is driving gold right now.”

ETFs typically charge fees as a percentage of the value of their assets. With investors adding to their holdings as spot gold soared to a record above $2,075 an ounce this month, earnings have benefited from a double boost.

Courtesy - The Business Standard



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