Gold ETF inflows YTD surpass any previous full calendar year

Jun 8th, 2020 | By | Category: Commodities

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Gold ETFs globally have now recorded greater inflows year-to-date (as of 31 May) than in any full calendar year before, according to data from the World Gold Council.

Gold ETF inflows YTD surpass any previous full calendar year

Gold ETF inflows YTD surpass any previous full calendar year

Gold ETFs added 154 tonnes of new gold assets last month, equating to $8.5bn net inflows (+4.3% AUM).

YTD inflows now stand at 623t ($33.7bn) which exceeds the previous full calendar year record of 591t seen in 2009.

Total holdings in gold ETFs have been boosted to a new high of 3,510t, while a rising gold price has also helped push assets under management into record territory at $195bn.

Collective holdings in gold ETFs have now surpassed Germany’s official gold reserves and exceed the official reserves of every country except the US, highlighting the popularity of ETFs as an efficient vehicle to gain gold exposure.

The gold price in US dollars increased by 2.6% in May, finishing the month at $1,728/oz. Bullion has risen over 15% this year, outperforming most major asset classes.

Demand drivers

According to the World Gold Council, despite a bullish environment that saw global stocks rise by 6% in May, investors have continued to allocate to gold to buffer portfolios in the face of lingering uncertainty. In particular, the gold authority notes the precariousness of falling Covid-19 infection rates as lockdown and social distancing restrictions are relaxed.

Additionally, while investors will be hoping for a smooth rebound in economic activity, the World Gold Council notes that labour markets remain challenged with unemployment nearing levels only seen during the Great Depression. Renewed tensions between the US and China are also overshadowing any potential recovery.

Gold demand has also been spurred by ultra-accommodative monetary policy globally whereby interest rates have been cut to record lows, reducing the relative appeal of income-producing securities such as gilts and Treasuries. The Federal Reserve’s intervention has also expanded into previously unchartered waters, such as purchasing high-yield bond ETFs, helping to push bond yields even lower, and reducing gold’s opportunity cost further.

Regional flows

North American-listed gold ETFs led regional inflows during May, adding 102t ($5.6bn, 5.6% AUM). Flows in the region are historically more correlated with gold’s price behaviour. The SPDR Gold Shares (GLD US) led global inflows with 67t ($3.7bn, 6.4% AUM) net new assets, while the iShares Gold Trust (IAU US) added 20t ($1.1bn, 4.7% AUM).

Low-cost gold ETFs also had a strong showing with the Aberdeen Standard Physical Gold Shares (SGOL US) adding 4.1t ($225m, 12.5% AUM), followed by Graniteshares Gold (BAR US) and SPDR Gold MiniShares (GLDM US) which each added $85m. Low-cost gold ETFs in the US have doubled their collective holdings in the past year to 99t, which is roughly the size of all Asian-based gold ETFs.

European-listed gold ETFs gathered 45t ($2.4bn, 2.9% AUM) in May, led by UK-based funds which accounted for 65% of the region’s total inflows. The iShares Physical Gold (SGLN LN) gathered 23.3t ($1.3bn, 11.8% AUM) and the Invesco Physical Gold (SGLD) added 6.9t ($384m, 3.5% AUM).

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