Invertia Gold loses weight in investment portfolios for the first time in six years

Messages of economic recovery and the pull of risk assets penetrated deeply into portfolios throughout the last year. So much so that, for the first time in the last six years, the active refuge par excellence lost prominence in its composition. No less than $9.9 billion came out of gold investment products during 2021.

Despite the fact that gold has traditionally been perceived as one of the most useful hedges against the inflation spike last year, the search for more generous returns than those of the precious metal worked against it throughout the past year . This is demonstrated by the investment figures on listed products provided by BlackRock.

Gold investment exchange-traded products (ETPs) saw hardly any capital inflows during the first two months of last year. And in the best of cases, it was barely around a cumulative volume of net subscriptions of 2,000 million dollars. Since then, as the economies began to show signs of recovery and the stock markets a sustained comeback, refunds took the lead month after month.

The only exception to this movement occurred in the summer, when many investors opt for a tactical turnaround for their portfolios in order to lose exposure to the fluctuations of some risky assets in order to detach themselves from the price screens. In addition, this movement coincided with the outbreak of the fifth wave of Covid-19 infections in Europe and the US, which promoted a certain return to assets considered safe haven.

If the number of redemptions in investment products on gold was significant on its own, it reaches a greater magnitude if one takes into account that throughout 2020, the year of the outbreak of the pandemic, they registered net capital inflows for 45,000 million dollars. As if that were not enough, according to the data provided by BlackRock, we would have to go back to 2013 to witness a greater withdrawal of positions than last year.

Better in the pocket

Regarding this point, there is one more factor that the US manager's analysis ignores. Tomás Epeldegui, director of Degussa Spain, points out that a large group of investors would have preferred to balance their investment portfolios with a direct bet on pieces of physical gold instead of investment products.

This trend was already seen when the Covid-19 spread across the borders of Europe and even caused some parts to run out of stock. In addition, Epeldegui points out that once the lesson has been learned that volatility is back in the markets, "there is a part of investors that could be less fond of the leverage that one assumes when contracting certain financial derivatives."

Several commodity analysts agree that, in times of turbulence, investors demand safe assets, but not only that, but also the most tangible assets possible. Especially those with a more conservative profile. In this sense, a gold ingot, coin or nugget is so gold that it can be kept in a pocket or a safe.

To finish downplaying the listed gold investment products, several managers point out that 2021 was “the year of consolidation of cryptocurrencies”. A class that appeared on the radar of many a year earlier in the form of a bitcoin that was presented as 'digital gold'.

Bitcoin and the Fed

Since then, it has been attracting more and more investors with the claim of its revaluation, but above all of a volatility that, well managed, can report significant returns. However, it is here where his supposed refuge character has been highly questioned, since once he became a mass asset he has moved to the sound of the stock markets in his last bearish episodes.

In addition, the same central banks, which with their hoses of liquidity pushed many to seek refuge in the precious metal, seem to have driven the way back with their first announcements of withdrawal of stimuli. Something that has been especially perceived around the appreciation of the dollar with the more hawkish plans of the US Federal Reserve (Fed).

Bank of America's global head of commodity and derivatives research, Francisco Blanch, points out that while gold "could recover prices because rates remain low and imbalances are growing," the truth is that "the plan of the Fed will dampen the trend”. And in the US investment bank they discount up to nine rate hikes between now and the end of 2023.

The data collected by BlackRock agrees with this appreciation, since in both October and November capital outflows from gold ETPs accelerated. Two months that coincide with the rumors about the beginning of the withdrawal of stimuli from the US central bank and the confirmation of the activation of tapering with a first downward adjustment of its debt purchase program.

With all this, the blow of this withdrawal in gold was felt even in the category of ETP on commodities. According to data from the American manager, over the past year there were net investment outflows of 2,800 million dollars in these products, which meant a return to red numbers in terms of capital flow after two years in positive.

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