Market turbulence leads to strong inflows for gold ETFs in October

Nov 6th, 2018 | By | Category: Commodities

Holdings in gold-backed ETFs rose by 16.5 tonnes globally in October, equivalent to approximately $1.0bn in inflows, as investors sought safe-haven assets amid a spike in equity market volatility.

Market turbulence leads to strong inflows for gold ETFs in October

Market turbulence leads to strong inflows for gold ETFs in October

According to a report from the World Gold Council, global stock markets experienced their worst October since the 2008 financial crisis with the MSCI All-World Index down more than 7.4% on the month.

On the back of this, gold ETFs recorded their first monthly net inflows in four months.

The increase in demand for the yellow metal led to positive performance for the month (+2.3% in US dollar terms), contributing to a 3.1% rise in total assets under management in gold ETFs in October.

US dollar-hedged gold benefited in the stronger dollar risk-off environment, rallying 4.3% on the month. The Solactive GLD Long USD Index is now effectively flat on the year, despite gold in US dollars being down 5.8% over the same period.

Flows into North American-listed gold ETFs were positive at 12.4t ($561million, 1.2% AUM), led by inflows into US-listed products and counterbalanced by softer outflows in Canadian funds. October marked the first time in six months that gold ETFs on continent recorded positive net inflows.

In contrast to recent months, where inflows headed to the lowest cost gold products, the SPDR Gold Shares (GLD US) recorded the strongest inflows in October with 11.8t ($475m, 1.7% AUM). The iShares Gold Trust (IAU US) was also popular, adding 5.0t ($198m, 2.0% AUM).

European-listed products also experienced robust inflows, rising by 10.5t ($678m, 1.7% AUM), driven primarily by UK-listed funds, with nearly half European inflows attributable to currency-hedged funds. Net inflows into euro- and Swiss franc-hedged funds accounted for $234m of the region’s total inflows.

Funds listed in Asia decreased by 6.5t ($259m, 8.4% AUM). China-listed gold ETFs experienced heavy outflows, equivalent to 8% of the country’s gold ETF assets. This was the second straight month of significant outflows, driven in part by profit-taking from some investors as the gold price in yuan rose by as much as 5% in October.

Trading volumes in gold ETFs also spiked during the month, increasing 32% above the year-to-date average.

Collectively, flows in gold-backed ETFs remain negative YTD at 25.8t ($399m, 0.44% AUM).

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