A few facts about gold ETFs

Gold is probably not going to do you much good if the Mayan calendar is right about the end of  the world tomorrow.  However, many people have become very interested in owning some of the metal in the last decade, which partially explains the increase in price.   One way people have invested in gold is via ETFs (Exchange Traded Funds) which can be bought and sold like a stock, avoiding the need to pay for storage or the risk of theft.

So what are some of the things that people should know about gold?

  • Emerging market demand. In the third quarter, India’s consumer demand was 223.1 tons and Greater China, including China, Hong Kong and Taiwan, hit 185.1 tons.

  • Central banks. The U.S. sits on 8,333 tons of gold, India 557.7 tons, Netherlands 612.5 tons, Japan 765.2 tons, China 1,054.1 tons and France 2,435.4 tons.

  • Investment demand. Jewelry made up 78.5% of total demand in 2002. In the third quarter of 2012, jewelry demand was 59.9% while investments accounted for the other 40.1%. According to the World Gold Council, 91% of European gold demand was in physical investment vehicles over the third quarter as a safe hedge against the euro currency.

  • Exchange traded funds. ETFs are the fastest growing market for gold demand, increasing 58% over the year ended in the third quarter 2012.

  • Supply. While 171,300 tons of gold has been extracted since mining began, the U.S. geological society estimates that about 51,000 tons still sit underground and the World Gold Council expects about 730 tons mined each year.

  • Inflation. Gold has appreciated from $18.92 in 1911 to over $1,700 in 2012.

  • Diversification. Gold is that rare investment product which is historically uncorrelated to financial assets.

  • Recyclable. Around 40% of total supply is recycled gold in 2012.

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