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Gold ETFs had net outflows of US$9 billion in 2021

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Global Mining Review,

New data released by the World Gold Council reports that physically backed gold ETFs saw global outflows of 173 t (-US$9.1 billion, -4% AUM) in 2021. Collective gold holdings were down 5% to 3570 t for the year, while assets under management (AUM) in value terms dropped 9% to US$209 billion as net outflows were compounded by a 4% contraction in the gold price. Despite considerable outflows for the year, gold ETF holdings remain significantly above pre-pandemic levels, as they posted record inflows of approximately 875 t (US$48 billion) during 2020.


Losses in 2021 were driven by North American funds, which never recovered from their significant outflows in 1Q21, ultimately registering outflows of nearly US$11 billion (-200 t) by year-end. The bulk of these outflows were from large US funds whose assets fluctuated in tandem with the gold price. Conversely, European ETFs turned positive in 2Q21 amid rising inflation expectations, ending the year with marginal gains of US$264 million (0.7 t).

Asian ETFs accounted for the vast majority of inflows among global funds, despite some weakness in 2Q21, adding close to US$1.5 billion (20%) over the year. This especially rang true for Chinese-based funds, which made up more than 60% of total inflows for the region, driven by concerns over slowing economic growth and lower yield expectations as well as local investors taking advantage of a lower gold price. Finally, low-cost ETFs attracted consistent inflows regardless of the direction of gold prices, increasing by 45% (63 t, US$3.7 billion). These funds now constitute in sum almost 6% of the global gold ETF market.

December highlights

Gold ETFs experienced net outflows of 6.4 t (-US$340 million) in December, consistent with monthly outflows during much of 2H21. North American outflows of 22 t (-US$1.2 billion) outweighed inflows into Europe and Asia, which gained a combined 16 t (US$942 million) during the month. Other regions saw negative flows for the first time since August, losing US$68 million (-1.2 t).

North American outflows once again stemmed from larger US funds, likely triggered by the US Federal Reserve (Fed) indicating its intent for multiple interest rate hikes in 2022 to combat decades-high inflation, while planning to scale back asset purchases early in the year. On the other hand, inflows into Europe continued despite the Bank of England’s decision to raise interest rates. Demand was also supported by a flight-to-quality as the Omicron variant of COVID-19 sparked renewed lockdowns. Inflows into Asian ETFs were primarily due to tactical buying in China after the local gold price fell in late November and early December.

Price performance and trading volumes 2021

Gold finished the year approximately 4% lower at US$1806/oz. The gold price rallied into year-end on the heels of the rapidly spreading Omicron variant, likely prompting flight-to-quality flows, but it was not enough to offset losses from early 2021. After 1H21 – when it dropped by more than 10% – gold was rangebound between US$1700/oz and US$1850/oz for much of the year. This was also reflected in gold’s realised volatility, which remained largely below its longer-term average of 16% after gold’s initial selloff during 1Q21.

Net long positioning, via the recent Commitment of Traders (COT) report for COMEX gold futures, oscillated alongside the gold price, falling to below 500 t (US$27 billion) in late March and rallying close to 900 t (US$52 billion) in mid-November as prices rose again. By the end of 2021 it had settled above 670 t (US$41 billion), markedly higher than its historical weekly average of around 500 t (US$31 billion).

The World Gold Council’s gold return attribution model suggests that gold’s performance in 2021 was driven, to an extent, by offsetting forces.

Gold faced headwinds from:

  • Higher bond yields, especially during 1Q21.
  • A stronger dollar – particularly in 2H21 – relative to other developed market currencies.

Conversely, gold was supported by:

  • Concerns that inflation surprises would not be transitory.
  • Market volatility linked to continued COVID variants and varying lockdown measures.

2022 outlook

Looking ahead, World Gold Council believes gold will experience similar dynamics in 2022. The persistence of high inflation is still likely due to knock-on effects from COVID-induced monetary and fiscal policies, supply-chain disruptions, and a tight labour market. This, combined with high equity market valuations, potential new COVID variants, and a growing appetite for less liquid assets, could well result in more frequent market pullbacks and increased demand for gold as a portfolio hedge. Gold may also find continued support from consumer demand and central bank purchases, both of which continue to be important long-term drivers of performance.

Adam Perlaky, Senior Analyst, commented: “Looking ahead, we’re staying vigilant of evolving monetary policies and a possible increase in interest rates at a more expedited speed, as signified by the Federal Reserve’s recent announcement, which could impede gold performance. However, historically, rates remain low and will continue to support gold demand given its role as a high-quality liquid asset as portfolio structure continues to change to accommodate market volatility.”

On the contrary, gold may also face challenges if interest rates rise quicker than currently anticipated. In our view, however, despite potential rate hikes both nominal and real interest rates will remain low from a historical perspective. This, in turn, will continue to drive structural changes in the composition of investment portfolios and likely increase the need for a high-quality liquid asset such as gold.

The World Gold Council’s Outlook 2022 will be published during the second week of January.

Regional flows

Outflows from North America in 2021 outweighed inflows from Asia and, to a lesser extent, Europe.

  • North American funds had outflows of 199.5 t (-US$10.9 billion, -8.9%).
  • European funds had inflows of 0.7 t (US$264 million, 0.3%).
  • Funds listed in Asia had inflows of 25.4 t (US$1.5 billion, 20.4%).
  • Other regions had marginal inflows of 0.1 t (US$17 million, 0.5%).

Individual flows

SPDR® Gold Shares and iShares Gold Trust in the US and WisdomTree Physical Gold in the UK drove global outflows in 2021, partially offset by inflows into Xtrackers IE Physical Gold and Xetra Gold in Germany.

  • In North America, SPDR Gold Shares had outflows of 195 t (-US$10.7 billion, -15.1%), while iShares Gold Trust lost 32.9 t (-US$1.8 billion, -5.6%).
  • In Europe, low-cost Xtrackers IE Physical Gold had inflows of 33.6 t (US$1.9 billion), while Xetra Gold added 20.7 t (US$1.2 billion, 9.1%); on the other hand, WisdomTree Physical Gold had outflows of 25.2 t (-US$1.4 billion, -19.5%).
  • In Asia, Chinese ETFs Huaan Yifu Gold had inflows of 5.9 t (US$317 million, 20.2%), while Bosera Gold Exchange gained 5.4 t (US$284 million, 24.8%).
  • Low-cost ETFs overall had sizable inflows of 63 t (US$3.7 billion, 45%).

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