Chinese investors' appetite for gold ETFs has been reflected in the sharp rise in the first half. Combined holding of four Chinese gold-backed ETFs rose from 6.3 metric tons at the beginning of the year to 24.4 tons at June-end, up 287 percent.
E Fund Global Tradable Open-ended Securities and Investment Fund, one of China's four gold-backed ETFs, saw a surging appetite for investments as its assets under management grew from 960 million yuan ($143 million) to 1.9 billion yuan in the past two months.
Lin Weibin, manager of the fund, said gold remains a haven for risk-averse investors and will continue to attract more of them amid slowing global economic growth and monetary easing.
China's holdings of gold-backed ETFs have dipped on occasion after the release of some positive U.S. economic data. These dips are considered part of a natural cycle based on investors' short-term sentiment change.
Overall, China's gold-backed ETF market is expanding fast as investors are getting more familiar with the investment option, said Yang Fei, analyst with Shanghai-based Seewonder Financial Information Ltd.
"Gold is always an option while building an investment portfolio. Short-term price fluctuations and holdings won't change gold's intrinsic merit as a long-term hedge against risk," said Yang.
Currently, gold ETFs in China are quite small relative to other investment options, so investors have little say in their pricing, despite China being one of the world's largest gold producers and consumers. But investors' increasing appetite and expanding knowledge will gradually improve the situation, said analysts.
Based on the size of gold holdings and the size of assets under management by the end of June, China's four gold ETFs were ranked below 50 among the more than 70 ETFs worldwide tracked by the WGC. The world's major gold ETFs are based in the U.S., Canada, the UK, Switzerland and Germany. Their gold holdings and assets under management far surpass those of Chinese ETFs.
Xue Ke, chief analyst and deputy general manager with Tianjin Jinhengfeng Precious Metals Management Co, said that precious metal-backed ETFs in China are going to further grow and get diversified given rising investor demand.
"China's existing gold-backed ETFs were introduced in 2012, which means the market is still quite young. Undoubtedly, more options will be introduced in the near future," said Xue.
