WisdomTree’s commitment to gold demonstrated by new hire and research from Nitesh Shah
European gold ETC champions WisdomTree, with USD23.9 billion in assets in commodities, and USD15.8 billion specifically in gold, has hired the former Institutional Relationship Manager covering EMEA from the World Gold Council, Nilesh Parmar, as Director of UK Institutional Sales, in a move that reflects the importance of both gold and the European institutional investor audience for the firm.
2020 was a big year for gold, says Nitesh Shah, Director, Research, WisdomTree. “Gold did what it is supposed to do in terms of being a defensive asset when the equity markets were having a tough time in the first quarter, and then with the onset of pandemic stress, it dipped a bit, fell a bit and then shot up and did its job. Correlations of all assets increase and then separate in crises.”
The precious metal hit an all-time high in August last year. “There was a real desire for a safe haven asset among the real life and economic chaos,” Shah says. “Since August it’s slipped off a bit, partly due to rotation towards more cyclical assets such as equities, oil and industrial metals which have bene rallying since the third quarter of 2020.”
Most recently, Shah comments that gold has had a tough time with rising Treasury yields. “There is a strong inverse relationship between Treasury yields and gold and that has released a bit of a headwind for gold,” he says. “But if you think about assets gathered in the gold industry and in gold ETCs, they were at their all-time highest in 2020.”
It wasn’t just the level of gold, but the pace at which it was gathering, Shah notes. “It was partly due to industry issues in the sense that when the pandemic first hit it was very difficult as all planes were grounded, refiners were shut and it was difficult to move metals from the big liquidity centres in London and Zurich to where the futures are actually settled.”
The result was lots of transition among the US institutional investors from futures to ETCs, Shah says, and notes that there is plenty of inventory now.
“For us as an institution, the biggest trend is demand for hedged currency exposure to gold,” he says. “And that’s due to the big sources of upwards pressure on the gold price. We believe there is a structural weakness in the dollar which should set us up for years of dollar depreciation for gold.”
ETF Securities launched the first physically-backed Gold ETP in Europe in 2004 and it was subsequently acquired by WisdomTree. The last decade or so has seen a growth in institutional use of them. Some investors who had sold gold in 2013 after price declines at the time had come back in 2020, Shah says. Those who were in gold for tactical reasons have fallen away as the prices came off but new inflation fears on the part of investors who are looking further out is bringing them back.
“Investors are worried about this period of extreme fiscal largess and its potential upon inflation,” Shah says.