Global assets under management (AUM) in US dollars rose 15% to US$115bn, the largest monthly increase since 2012, as all regions experienced inflows. More than half the AUM growth came from the 9% gold price rally in US dollars. Gold is one of the strongest performing asset classes in 2019, and reached all-time highs in a handful of currencies, most notably the Australian dollar, particularly relevant as Australia ranks second globally amongst countries in gold mining production.
North American funds added 65t (US$2.9bn, 5% of AUM), driven in part by momentum investors who utilised the most liquid funds to gain investment exposure. Additionally, low-cost gold-backed ETF assets rose to all-time highs of 53t (US$2.4bn), representing 85% growth over the past year. We believe the strong asset growth in not only larger, more liquid funds, but also low-cost funds, highlights increased holdings by both tactical and strategic investors.
European funds brought in 59t (US$2.5bn, 4.7%), as UK-based funds represented three out of the top five funds globally in terms of inflows. The continued uncertainty surrounding UK leadership and Brexit continued to drive gold investment demand, with UK-based holdings at all-time highs.
Gold prices broke out above the five-year resistance level of US$1,365, as momentum and sentiment shifted. After spending much of last year at historically low levels, COMEX net longs increased to 868t at the end of the June, the highest level in nearly three years3. Gold trading volumes increased to US$165bn per day in June, 45% higher than the 2018 average, driven by volume in the over-the-counter (OTC) markets, which rose 50% m-o-m. Gold options put/call skew continued to move to extreme levels, as investors paid a much higher premium to buy calls versus puts.
UK-based gold-backed ETFs represent 60% of global inflows in 2019
- North American funds had inflows of 65t (US$2.9bn, 5.0% AUM)
- Holdings in European funds rose by 59t (US$2.5bn, 4.7%)
- Funds listed in Asia increased by 2.4t (US$107mn, 3.3%)
- Other regions had inflows of 0.4t (US$16mn, 1.2%).
ETFS Physical Swiss Gold added US$1bn in June growing 115% over the month
- In North America, SPDR® Gold Shares added 51t (US$2.2bn, 7.2%), and experienced its largest, one-day inflows of all time on 21 June, while iShares Gold Trust added 12t (US$537mn, 4.6%) and low-cost gold-backed ETFs added $72mn or 3% of assets.2
- In the UK, ETFS Physical Swiss Gold added 23t or nearly US$1bn and grew by 115% during the month. iShares Physical Gold ETC added 20t (US$900mn, 21%) and Invesco Physical Gold added 5.7t (US$, 240mn, 4.2%)
- In China, Bosera’s listed fund added US$45mn or 13% of its assets last month, and Huaan Yifu added $43mn, but leads global outflows on the year losing US$348mn or 32% of its assets.
H1 2019 Highlights
Gold-backed ETFs added 67t (US$3.1bn, 2.7% AUM) in the second quarter, 11% higher y-o-y. Nearly all the quarterly inflows came from European funds and 75% of all global inflows came from UK-based funds.
Global gold-backed ETFs grew 4.3% (as a percentage of AUM) during the first half of 2019, despite heavy outflows in February, April and early May. European funds represented 78% of global y-t-d inflows, growing 7.3% in 2019. However, first-half inflows were 30% lower y-o-y given the high level of inflows (+161t) over the first six months of 2018.
Despite stock markets trading at or near record levels—the strongest first-half performance in 20 years-- fixed income markets still expect two or three US rate cuts in 2019, as economic data worsens. Earlier this year we noted that rates related to monetary policy would drive gold prices in the short-run, and that the US dollar would play a less significant role, and this has been the outcome so far. With rates falling, global negative-yielding debt is at all-time highs – above $13 trillion – and the price of gold has moved in tandem with those amounts over the past few years. These are all drivers that could continue to support gold prices in the second half of the year.
To learn more about drivers of gold performance during 1H 2019 and key trends to watch during 2H 2019, see our mid-year outlook, which will be published on Thursday 11 July.
Global gold-backed ETFs grew 4.3% over the first half of 2019
- European gold-backed ETF holdings represent its largest percentage of total global assets in history at 47% of total assets, trailing North America by US$3.6bn
- Flows in the larger North American funds have been momentum driven with the recent price increase pushing y-t-d flows into positive territory (2.7% of AUM)
- Long-term strategic holders continue to add to low-cost gold-backed ETFs on a consistent basis, with inflows during 12 of the past 13 months, growing 84% percent over that period‡
- Outflows of more than 11% in Chinese funds have been a function of profit taking and a shift to riskier assets in the region
- Political uncertainty and a weaker pound sterling have supported inflows to UK-based gold-backed ETFs, which remain at all-time highs. UK-based holdings have grown to 554t or 22% of global gold-backed ETF assets.