Gold ETFs, or exchange-traded funds, will remain supportive to the gold industry in 2017, Randgold CEO Mark Bristow said Wednesday, and he expects to see flows benefit this year amid uncertainty and volatility.
"The introduction of gold ETFs, giving people a new and easy way to invest in physical gold, has created an important link between the physical and equity-mining gold market," Bristow said, speaking at this year's Indaba mining conference in South Africa.
"They have been overall very positive for the industry and, for us, give people an alternative platform to take a view without having to take high-risk 'punts' on equity."
"For any market, the more efficiently it functions the better, and ETFs have helped that."
It was a view shared by Johann Erasmus, speaking on the same panel discussing the impact of gold ETFs on the industry.
"ETFs were treated with a lot of suspicion at first but they have become a very important window into gold markets, not only as a vehicle to invest," Erasmus said.
Despite fears ETFs would divert money that would otherwise go to producers when introduced over a decade ago, the consensus view is now very different, according to Erasmus.
"There is a big universe for equity capital, which is relatively sticky, and there is no evidence that money is flowing from one to another."
"As ETFs become more prominent they will be used more. Large gold-consuming countries like India and China are only expected to increase their ETF flows, especially as technology and access improves in those countries," Erasmus said.
Despite falling in the last quarter of 2016 as gold prices came down, flows into gold-backed ETFs totaled over 500 mt in 2016, according to the World Gold Council.
It was the first increase since 2012 and the second highest annual addition, behind 2009.
With only around 5% into Asian ETFs last year, Bloomberg's Eily Ong agreed there was significant room to grow.
"Young investors looking for a different way to invest in gold are expected to increase ETF gold buying in China," Ong said.
"Buying during times of uncertainty last year, especially around the depreciation of the yuan, helped gold ETF demand in China up close to fivefold on the year."
Asked whether regulatory changes by the Chinese government had made it harder to invest in ETFs, Ong believes it had a different impact.
"It added to the overall uncertainty, which helps gold demand. Overall, it had the reverse effect."
"ETFs in Asia are still in their infancy, but we would expect the general pattern of flows from west to east to continue," Metal Focus's George Coles said.
"Gold ETFs are a great barometer of gold sentiment and we would expect demand to remain strong in 2017," Coles said, adding he foresaw a slight uptick in gold prices this year.
Spot gold was priced around $1,230/oz Wednesday morning, holding at two-month highs. It is up just over 7% since the start of the year.
