Gold ETF inflows accelerate in August

Sep 12th, 2019 | By | Category: Commodities

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Global gold-backed ETFs (and ETPs) recorded $6.0 billion net inflows in August, increasing their collective gold holdings by 122 tonnes to 2,733t, according to data from World Gold Council.

Gold ETF inflows accelerate in August

August represented the third consecutive month of positive net inflows into gold ETFs globally.

Total holdings in gold ETFs are 59t or 2% away from its all-time high of 2,791t which occurred in late 2012.

Combined with a 7% increase in the gold price during the month, assets under management within gold ETFs globally rose 12% to $134bn.

August represented the third consecutive month of positive net inflows into gold ETFs and saw an acceleration in buying activity compared to the $2.6bn net inflows recorded in July.

Demand for gold exposure has been increasing as investors seek out safe-haven assets to buffer their portfolios against geopolitical risks such as the ongoing US-China trade dispute and the possibility of a no-deal Brexit.

Decreasing global rates has also contributed to renewed interest in gold through two channels. Firstly, lower rates decrease the opportunity cost of holding non-interest-bearing assets such as gold, making them relatively more attractive.

Secondly, the US Treasury yield curve has inverted between two- and ten-year yields. An inverted yield curve has historically been a significant predictor of an upcoming economic recession, thereby further supporting demand for safe-haven assets.

Flows

North America led gold ETF flows in August, adding 78t ($3.8bn, 5.5% of AUM), surpassing Europe as the region with the most inflows in 2019.

Inflows were driven primarily by the largest gold ETFs such as the SPDR Gold Shares (GLD US) and iShares Gold Trust (IAU US) which added 55t ($2.7bn, 7%) and 18t ($897 million, 6.4%) respectively.

Low-cost gold ETFs – those with expense ratios of 20 basis points or less – continued to grow, accumulating 2.3t during the month and bringing their joint holdings to an all-time high of 58t ($2.8bn).

In Europe, gold ETFs brought in 33t ($1.7bn, 2.8%), mainly via UK-listed products ($1.0bn) as the pound continued to weaken and the probability of a no-deal Brexit grew. Three of the top ten gold ETFs globally by net new assets were from the UK including the Invesco Physical Gold ETC (SGLD LN) which added 9.3t ($434m, 6.8%) and the iShares Physical Gold (SGLN LN) which added 9.3t ($441m, 7.6%) during the month.

Germany-listed gold ETFs recorded $330m net inflows as the government auctioned its first-ever 30-year negative nominal-yielding bond.

Funds in Asia reversed year-to-date outflows, adding 9t ($468m, 12%) while Chinese gold ETFs drove inflows with 9.7t ($477m).

From a currency perspective, the US dollar closed August near YTD highs, despite deteriorating economic conditions and market implications of additional central bank rate cuts this year. Gold is now at all-time highs in every major G10 currency except the US dollar and Swiss franc, while it is nearly at an all-time high in Chinese renminbi.

Year-to date

Global gold-backed ETFs have added 292t ($14.0bn, 10.4%) YTD, driven primarily by strong inflows in the past three months.

Europe-listed gold ETFs have grown consistently this year, seeing positive flows in all months except April. UK-based fund holdings are at all-time highs, reaching 577t or 21% of global gold-backed ETF assets in August.

Strong inflows in North American-listed gold ETFs over the past three months have increased the regions’ contribution to 2019 growth – as of the end of August, North America added 152t compared to 139t in Europe.

Low-cost gold-backed ETFs in the US have seen positive flows for 14 of the past 15 months and have increased their collective holdings by 37% so far this year as both gold holdings and the gold price have risen.

Asia-listed gold ETFs have reversed strong early-year outflows and now have small inflows on the year, following renewed interest for gold investing in China.

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