Why the gold run still has legs

Gold bulls often attribute gold's meteroic rise to exchange-traded gold funds. But a new study disagrees. So what is driving the gold price?

A new research paper sheds fresh light on the meteoric rise of the gold price over the last decade. Gold has risen more than 500% in the last ten years. Gold bulls often say this is because of rising inflation and falling confidence in the fiat money system. Gold bears, however, argue that the real reason is the creation of exchange-traded gold funds, which encouraged a wave of speculative investors in the Western world.

But according to a study by Amit Bhartia and Matt Seto of American investment firm GMO, the majority of physical gold purchases have not come from speculators in exchange-traded funds (ETFs). ETFs only account for a tiny fraction (around 7.5%) of the near-30,000 tons of gold purchased between 2000 and 2010. The demand didn't come from developed market investors or central banks either in fact, central banks have been net sellers.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
MoneyWeek

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.