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General Precious Metals
Sprott Can’t Keep Up With Demand as Turmoil Spurs Gold Rush
Investors are rushing to put their money into gold as the coronavirus pandemic roils markets worldwide, with one asset manager reporting demand dwarfs the spike seen during the last financial crisis.
“Everybody wants to reexamine gold and it’s not a fringe asset anymore. We’ve been run off our feet,” said Peter Grosskopf, chief executive officer at Sprott Inc., which manages $10.6 billion. “Even though we’re operating virtually, we cannot keep up with the demand to speak with new clients or interested clients. It just keeps climbing.”
The precious-metals-focused asset manager will likely have to hire additional staff to handle its busiest ever period, with demand far surpassing the level seen during the global financial crisis, he said. The volume of inflows jumped fourfold in March from the first two months of the year. In value terms, they reached almost $500 million in the first quarter, with more than $400 million going to the Sprott Physical Gold Trust, compared with outflows of $178 million a year earlier.
Gold demand has soared, pushing prices to the highest in more than seven years, as governments and central banks unleash vast amounts of fiscal and monetary stimulus to help shore up economies hurt by the virus. The wave of measures triggered by the pandemic is likely to have worsened a credit crisis that was already brewing, said Grosskopf.
“You do not need to be a gold bug to believe that gold is the right move to hedge yourself against the financial system right now,” he said. “We’ve entered into an environment of the monetization of debt and the debasement of currency, and all of these governments believe they can control that process; history suggests that they cannot. Gold is the way to hide from that.”
Spot bullion declined 1% to $1,678.93 an ounce, paring this year’s gain to 11%. Prices hit a record $1,921.17 in 2011, and Grosskopf has previously said it’s got a good chance of surpassing that level. Global holdings in gold-backed exchange-traded funds are at a record. They doubled between mid-September 2008, when Lehman Brothers Holdings Inc. collapsed, and the end of 2009.
Supply Disruption
The recent squeeze in the physical gold market also added to investor interest in Sprott’s business, said Grosskopf, who has 32 years’ experience in the precious metals industry. Spreads between spot prices and futures blew out in March as supply chain disruptions sparked concerns about a gold-bar shortage in New York just before April contracts became deliverable.