Global gold-backed ETFs trimmed 23.7 tonnes, equivalent to $932 million in redemptions, during September – the fourth consecutive month of net outflows – according to data from the World Gold Council (WGC).
World Gold Council believes current flows indicate investors’ appetite for buy-and-hold investing versus selling pressure from short-term tactical positions.
Assets under management across the global gold-backed ETF industry were down 2.3% relative to the end of August, following a drop in the gold price of 1.1% during the month.
According to WGC analysts, the lower finish in the month’s US dollar gold price was driven by higher Treasury rates, a risk-on appetite in the US, a lack of a systemic risk event worldwide, and momentum.
Gold had been range bound near the $1,200 level prior to the Federal Reserve meeting, only to fall after the latest rate hike announcement, breaking the trend of rallying following a Fed meeting.
The US dollar was relatively flat on the month as strength against emerging market currencies was offset by weakness against some developed market currencies.
All regions had net outflows in September. In all, trading volumes in gold-backed ETFs were light during the month, falling 30% versus their year-to-date (YTD) average.
Flows in North American gold-backed ETFs were mixed, but ultimately negative with net outflows of 6.1t ($258m, 0.6% AUM): funds with lower management fees had robust inflows that were offset by outflows in the SPDR Gold Shares (GLD US) which shed 12.9t ($487m, 1.7% AUM). GLD is a seasoned gold product, having initially launched in 2004 and currently housing over $28bn in assets; however, its cost is relatively high with an expense ratio of 0.40%.
The cheaper iShares Gold Trust (IAU US) at 0.25% added 4.1t ($159m, 1.6% AUM) of gold during the month. IAU and GLD experienced the best and worst net flows respectively amongst all gold-backed ETFs in September. IAU contains around $10.3bn in AUM, still a way off challenging GLD for largest gold ETF but the gap continues to close.
Other smaller low-cost ETFs in North America also grew meaningfully during September. The SPDR Gold MiniShares (GLDM US) doubled its AUM by adding 3.0t ($117m) while the newly launched Perth Mint Physical Gold ETF (AAAU) added 0.8t ($31m, 153% AUM). GLDM and AAAU come with expense ratios of just 0.18% each.
WGC believes the trend of money moving away from higher-cost gold ETFs and into lower-cost products highlights investors’ appetite for buy-and-hold investing versus selling pressure from short-term tactical positions.
Holdings in European funds fell by 10.2t ($379m, 1.0% AUM). The Invesco Physical Gold ETC (SGLD LN) added 3.6t ($141m, 3.5% AUM), while the iShares Physical Gold (IGLN LN) lost 8.4t ($333m, 9.3% AUM).
AUM of funds listed in Asia decreased by 6.5t ($253m, 7.7% AUM). China-listed Bosera Gold was the big loser for the month with 6.4t ($251m, 21% AUM) of net outflows.
The latest redemptions in September mean that global gold-backed ETFs have trimmed 42.3t of gold YTD, representing $1.4bn in assets or 1.6% of total AUM.
North American flows have been negative for five straight months with $3.1bn (6.8% AUM) pulled out during the year. By contrast, European fund flows remain positive for the year, but are now slightly below $2bn (4.9% AUM).
After starting the year strong, Asian funds have given up most of their inflows and are now modestly up with $134m (4% AUM) net inflows recorded YTD.