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Gold ETFs close 1H20 with record net inflows

Published by
Global Mining Review,


The World Gold Council has released new data for June and 1H20 gold ETF flows. Gold-backed ETFs and similar products account for a significant part of the gold market, with institutional and individual investors using them to implement many of their investment strategies. Flows in ETFs often highlight short-term and long-term opinions and desires to holding gold.

Gold-backed ETFs (gold ETFs) recorded their seventh consecutive month of positive flows, adding 104 t in June – equivalent to US$5.6 billion or 2.7% of assets under management (AUM) – taking global holdings to new all-time highs of 3621 t. This brings 1H20 global net inflows to 734 t (US$39.5 billion), significantly above the highest level of annual inflows, both in tonnage terms (646 t in 2009) and US-dollar value (US$23 billion in 2016). 1H20 inflows are also significantly higher than the multi-decade record level of central bank net purchases seen in 2018 and 2019, and could absorb a comparable amount of about 45% of global gold production in 1H20.

In June, global gold ETFs registered three consecutive days of outflows near the beginning of the month – the first consecutive daily declines since March – before regaining momentum. All regions saw net inflows during the month, with North American funds accounting for the lion’s share.

Juan Carlos Artigas, Head of Research, World Gold Council, commented: “Gold ETF investment demand shattered numerous records this year as investors sought safety from the economic turmoil created by COVID-19. To put it in context, inflows in 1H20 significantly exceeded multi-decade record levels of net gold purchased by central banks in 2018 and 2019.”

North American funds led once again, accounting for 80% of global net flows during the month - they added 4.3% AUM (US$4.6 billion). On this, Artigas said: “As states began to emerge from lockdown, inflows into North American funds reached a remarkable 80% of global activity, reflecting ongoing investor concerns around economic recovery and infection rates.”

Elsewhere, European funds added 0.7% AUM (YS$745.7 million), led by Swiss and German-based funds and Asian funds, led by increases in India, rose fractionally by 0.6% (US$36.7 million), while funds in other regions grew 4.4% (US$150.1 million).

The economic and geopolitical environment remains supportive for gold investment, with most of the existing gold demand drivers still relevant. The opportunity cost of holding gold remains low, as continued central bank activity keeps interest rates low or negative, while several countries continue to experience high levels of tension/unrest.

And there are serious concerns that the trajectory of the COVID-19 pandemic threatens any nascent economic recovery. Growing infection rates across some parts of the world, particularly in the US, suggest that there is some way to go before economies can reopen with confidence. In a recent media briefing, Dr Tedros Adhanom Ghebreyesus, Head of the World Health Organization, warned that "although many countries have made some progress, globally the pandemic is actually speeding up," meaning that investors will continue to face heightened risk and uncertainty.

Artigas concluded: “We expect gold ETF investment demand to continue its strong momentum in 2H20 as concerns over COVID-19 economic impact and infection rates linger, gold price performance remains solid and accommodative monetary policy heightens risk-off sentiment.”

Read the article online at: https://www.globalminingreview.com/special-reports/08072020/gold-etfs-close-1h20-with-record-net-inflows/

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