Gold ETF inflows maintain high tempo

May 11th, 2020 | By | Category: Commodities

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Gold ETFs experienced global net inflows of $9.3 billion in April, increasing their collective holdings by 170 tonnes to reach a new all-time high of 3,355t, according to data from the World Gold Council.

Gold ETF inflows remain strong

April marked the sixth consecutive month of net inflows into gold ETFs.

Total assets under management in gold ETFs also set a new high watermark at the end of the month at $184bn.

April marked the sixth consecutive month of net inflows for gold ETFs which have seen demand pick up in the Covid-19 pandemic environment.

Gold ETFs recorded net inflows of $8.1bn in March and $4.9bn in February.

Gold remains an attractive investment as investors seek its safe-haven status to protect against potential future equity market volatility, while record low interest rates reduce the appeal of income-producing securities such as gilts and Treasuries.

Bullion has also traditionally acted as an inflation hedge, a feature that may prove valuable as the US Treasury and Federal Reserve embark upon extensive fiscal and monetary stimulus in a bid to shore up the US economy which is currently in reverse gear.

The Fed’s concerns that the US economy could enter a period of deflation is, of course, a live and valid concern for gold investors; however, the actual impact of such a deflationary scenario on gold is perhaps less clear as deflation would wreak havoc on production and the stock market, ultimately increasing gold’s safe-haven appeal.

The World Gold Council notes that although inflows into gold ETFs have been strong and consistent in recent months, they are not unprecedented. Rolling twelve-month inflows of 879t just surpassed those of 2009 in the wake of the global financial crisis, while rolling six-month inflows have barely covered two-thirds of inflows in the comparable time period in 2009.

Juan Carlos Artigas, Head of Research at the World Gold Council, commented, “The strong investment demand for gold is not surprising as gold has repeatedly proven itself as an effective hedge during complex and challenging market conditions, including the global financial crisis and the current COVID-19 pandemic. Gold has outperformed most major asset classes and is up 11% year to date – we expect this trend to continue as investors navigate ongoing market and social uncertainty and the impact of central bank intervention.”

The price of gold in US dollars gained 5.8% in April to finish the month above $1,700/oz, a level not seen since 2012. While gold is still 10% below its all-time high in US dollars, it continues to strike new records in every other major currency including euro, pound sterling, yen, Australian and Canadian dollars, renminbi, and briefly made a new high in Swiss francs during the month.

Regional Flows

Gold ETFs listed in all regions experienced net inflows during April with demand being particularly strong in North America where flows tend to be more correlated with the gold price.

North American gold ETFs added 144t ($7.8bn, 8.3% AUM) led by the SPDR Gold Shares (GLD US) with 89.5t ($4.9bn, 9.7% AUM) and iShares Gold Trust (IAU US) with 31.2t ($1.7bn, 8.5% AUM). Low-cost gold ETFs also had a strong showing with the SPDR Gold MiniShares (GLDM US) gaining $330m (21% AUM) and the Aberdeen Standard Physical Gold Shares (SGOL US) gathering $245m (17% AUM).

European gold ETFs added 20t ($1.1bn, 1.4% AUM). Two UK-based gold ETFs led European inflows – the Invesco Physical Gold (SGLD LN) added 13.9t ($749m, 7.8% AUM) while the iShares Physical Gold (SGLN LN) attracted 7.2t ($420m, 4.2% AUM).

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2 Comments to “Gold ETF inflows maintain high tempo”

  1. Geoffrey Lennon says:

    “SPDR Gold Shares (GLD US) with 89.5t”

    James Lord, would you be able to provide any verifiable evidence to support this claim? How reliable are GLD’s holding reports? GLD does not give retail investors the right to redeem for any of its mystery physical gold holdings. This fact alone ensures the GLD shares to be nothing more than paper at the end of the day. GLD also has a glaring audit loophole in their prospectus that states they have no right to audit subcustodial gold holdings. To this day, I have not heard of a single good reason for the existence of this backdoor to the fund. Some other red flags I’ve stumbled upon, verified and welcome everyone else to verify for themselves:

    “Did anyone try calling the GLD hotline at 866 320 4053 in search of numerical details on GLD’s insurance? The prospectus vaguely states “The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody.” When I asked about how much of the gold was insured, the representative proceeded to act as if he didn’t know and said they were just the “marketing agent” for GLD. What kind of marketing agent would not know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors.”

    “I remember there was a highly publicized visit by CNBC’s Bob Pisani to GLD’s gold vault. This visit was organized by GLD’s management to prove the existence of GLD’s gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on the most recent bar list at that time. It was later discovered that this “GLD” bar was actually owned by ETF Securities.”

    • James Lord, CFA says:

      Hi Geoffrey,

      Thank you for your interest in the article.

      You have raised some intriguing questions about the SPDR Gold Shares (GLD US) which I’m sure many investors would be interested in having answered considering the size and popularity of this ETP.

      The information in the article is based upon a monthly flows report provided by the World Gold Council, the market development organization for the gold industry and the co-sponsor of GLD (along with State Street).

      Kind Regards,
      James

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