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Gold ETFs demand shatters records

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Global Mining Review,

As COVID-19 shook global markets, holdings in gold-backed exchange-traded fund (ETFs) reached all-time highs this month with net inflows up by 5% (US$8.1 billion), according to new World Gold Council data.

1Q20 highlights

Global gold-backed ETFs and similar products added 298 t, or net asset growth of US$23 billion, across all regions in 1Q20, the largest quarterly gain in history.

March highlights

Globally, gold EFTs added 151 t, or net inflows of US$8.1 billion, in March, boosting holdings to new all-time highs of 3185 t. Despite a mostly flat gold price performance in US dollars for the month, gold prices dominated in many other currencies.

Regional overview

Uncertainty around the short- and long-term economic impact of COVID-19 continues to drive sharp volatility across many assets. Gold EFTs listed in all regions experienced strong inflows during the month.

European funds led regional inflows, growing by 84 t (US$4.4 billion), while North American funds added 57 t (US$3.2 bullion. Asian funds, primarily China, also ended the month with strong inflows, adding 4.9 t (US$309 million), and funds in other regions added 4.7 t and US$249 million.

Price performance

Despite finishing the month almost unchanged at US$1609/oz, gold was incredibly volatile during March. This realised volatility of gold across tenors rivalled levels last seen during the European credit crisis of 2011and the implied volatility reached levels last seen during the global financial crisis.

When risky assets like stocks sold off sharply, investors needed to meet capital requirements; one way this was possible was to sell a liquid and outperforming asset like gold. At its trough, gold sold off 7% during the month, effectively giving up its yearly gains.

Gold global trading volumes averaged US$236 billion/day in March, with an increase of 61% y/y.

Looking forward

Recent drivers of investment demand are expected to continue: namely, widespread market uncertainty and the improved opportunity cost of holding gold as yields move lower.

With the US Federal Reserve taking interest rates to zero for the foreseeable future, gold could do well as it tends to outperform during easing cycles. Additionally, multi-trillion dollar fiscal stimulus policies to combat the economic impact of COVID-19 could provide inflationary - a development that could support gold prices in the long run.

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Gold mining news World Gold Council news