Gold ETFs Likely to Remain Popular Despite Lower Demand for Bullion

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Even though gold has a rough second half to 2020, the overall uptrend remains intact. As far as gold ETFs are concerned, it is very likely that overall interest will remain high. Investors still see a lot of merit in these vehicles, despite the current market momentum. 

Several factors contribute to lower demand for gold and bullion. Just recently, it became apparent that gold jewelry is in far less demand than it has been in recent years. Even though some market recovery is visible on the charts already, it will not be sufficient to offset the overall downtrend. 

Additionally, there is the overall impact of COVID-19 on various sectors. Until things return to normal – assuming that ever happens – the demand for physical gold will remain subdued. In India, for example, gold demand is down by nearly 30% compared to 2019. As a result, the price of bullion drifts lower and lower, as no stable price support level can be identified. 

Despite these setbacks, investors continue to flock to gold ETFs. An intriguing turn of events, although it is not illogical either. Rather than betting on the jewelry-oriented investment, a gold ETF can offer more profit potential at any given moment. 

This growth has become more outspoken over the past 12 months. This year’s gold price surge will certainly be a contributing factor. As people seek more exposure to the precious metal’s performance itself, rather than its associated markets, gold ETFs make for a perfect fit. There is still a lot of financial uncertainty ahead, and preparing for the worst is never a bad idea.

More Growth Expected

Even if the bullion price were to drift lower, it is plausible the demand for gold ETF exposure will keep rising. From a long-term perspective, gold ETFs provide a better investment opportunity compared to physical bullion or jewelry. Most of this growth is likely to materialize in India, where precious metals are kept in high regard.

Additionally, it is a lot cheaper to invest in an ETF compared to physical bullion. With little to no expenses associated with these vehicles, they are more appealing to consumers. Combined with the bigger liquidity to buy and trade, the appeal will only increase. Consumers often prefer convenience over anything else, after all.

As more central banks enforce aggressive policies, inflation remains a likely outcome. Such a turn of events will be beneficial to neither consumers nor corporations. Hedging against future financial volatility will remain a top priority for everyone. As such, gold ETFs remain a solid option. 

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