The euro zone crisis has driven investment in gold-backed exchange-traded assets so high that newcomer Source now owns the world's sixth largest physically-backed gold product and sees no need to promote it actively outside Europe and the Middle East.

Source, jointly owned by major investment banks BofA Merrill Lynch., Goldman Sachs, J.P. Morgan, Morgan Stanley and Nomura, says its focus will remain on these core markets.

Source launched its first precious metal product, a gold-backed exchange-traded commodity (ETC) product, in July 2009.

Since then, holdings of metal that back the gold ETC have risen to more than 1.23 million ounces, beating Canada's Sprott Physical Gold Trust to the ranking as sixth largest bullion-backed product by holdings, according to Reuters data.

"We are aware that there are investors outside our target geography. Our gold fund is sharia-compliant and there is certainly interest in the Middle East. Any demand that might exist outside Europe and the Middle East is a happy coincidence but not something we are chasing," Michael John Lytle, managing director of Source, said.

Unlike an exchange-traded fund (ETF), which issues shares to its investors, ETCs issue debt securities, or certificates, backed by physical metal and although they give investors exposure to the price of the underlying asset, their structure is different.

Source's physically-backed gold ETC is listed in London  and, with assets under management (AUM) of around $2.11 billion, is also easily the company's largest exchange-traded product (ETP) in terms of AUM.

The gold price has risen in the fourth quarter of the year to within 10 percent of September's record high of $1,920.30 an ounce and escalating alarm over the extent of the euro zone debt crisis has resulted in record demand for bullion-backed ETPs, which now hold nearly 70 million ounces of metal, or 2,180 tonnes.

"Clearly, gold, over a number of years now has seen a very positive trend of being a favoured financial investment. It is seen as a safe haven and it seems that trend has some momentum," Lytle said, adding the company did not make price forecasts.

Source, which also offers ETPs backed by fixed income and equity assets, launched three new precious metal products this year, backed by silver, platinum and palladium.

 Its palladium ETC has taken in nearly 100,000 ounces of metal in the last seven months, in sharp contrast to the near-constant outflows of metal from the more established palladium-backed ETPs so far this year.

Palladium ETPs have suffered particularly badly in 2011 from investor concern over demand for metals in the industrial sector and, in the case of palladium particularly, over demand in China for the metal used in vehicle catalytic converters to treat emissions.

China is the world's largest commodity consumer and also home to the world's largest growing auto market and signs of slowing economic activity and restricted credit availability have prompted a 26-percent fall in the price of palladium in 2011 to around $588 an ounce.

This has also triggered a net outflow of 28 percent, or nearly 600,000 ounces in the amount of metal held in the three largest palladium-backed ETPs, run by ETF Securities  and Swiss private bank ZKB.-Reuters