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Gold Investors Switch Out Of ETFs To Physical Market, Claims Platform

Tom Burroughes, Group Editor , August 11, 2020


The arguments about the pros and cons of holding physical gold directly rather than via a proxy instrument or entity such as a fund is given another twist by the investment platform.

An investment platform focused on alternative assets has claimed that a large chunk of its new clients are switching out of gold-linked exchange traded funds to directly hold the yellow metal because they are worried about high central bank money printing.

In comments that will fuel debate about how to play the gold market – currently strong amid macro-economic concerns – iTrustCapital said that 43 per cent of new customers are using its gold investment platform plan to transfer assets out of gold ETFs.

"Since we launched gold on our platform, most of the clients I speak to are moving funds from gold ETFs to fund their accounts. A common theme is a complete loss of trust in government and Wall Street," Blake Skadron, chief operating officer of iTrustCapital, said. 

The firm said that clients want to hold physical gold directly rather than indirectly via an ETF or some other instrument. Clients place trades that are executed through precious metals house Kitco and stored at the Royal Canadian Mint. The assets are 100 per cent backed with physical metals, it said.

After pushing over $2,000 per ounce in early August, the price has eased back below that level in recent days. Wealth managers and gold industry figures have predicted that the metal could advance further. (See an example here, and an article about family offices and gold here.)

Looking at the US market alone, iTrustCapital said the US Federal Reserve has pumped nearly $9 trillion into the financial system since the COVID-19 pandemic struck in March. The total US debt could exceed 180 per cent of GDP by 2040, according to projections from the nonpartisan Committee for a Responsible Federal Budget, iTrustCapital said. 

"Debt levels are getting to the point where governments will increasingly be incentivized to devalue their currencies to service that debt," Tim Shaler, chief economist iTrustCapital, said.

The firm was launched last year and aimed at clients managing their retirement accounts. 

FWR continues to track developments in the space, such as new investment plays around gold. It interviewed the Arizona-based business Monetary Metals more than three years ago about how to obtain yields in gold - an approach challenging conventional views about the metal. 

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