Regional overview – Q4 and December 2020
In contrast to the first three quarters of 2020, which saw a cumulative 1,007t added to global AUM, Q4 had net outflows of 130t. Funds listed in North America (-86t, -US$5.0bn, -4%) and Europe (-35t,
-US$2.3bn, -2%) accounted for the bulk of the outflows. Funds in Asia lost 4.7t (-US$255mn, -3%), while outflows from funds listed in other regions (-4.4t, -US$257mn, -7%) were also notable.
Outflows slowed considerably in December. North American (-1.2%) and European (-0.8%) funds again saw the largest level of outflows, although Asian funds experienced the largest decline relative to their size (-1.7%). Total outflows were 40t (-US$2.2bn, -1.0%).
Price performance and trading volumes 2020
Gold rose 25% during 2020, hitting a historical high of US$2,067.15/oz on 6 August. Despite dropping 12% in March, when markets were rocked by the onset of the COVID-19 pandemic, gold recovered to finish the year among the best-performing assets, despite many stock indices reaching or surpassing all-time highs. Gold’s volatility during the year was also higher, with annualised volatility at 20%, the highest level since 2013 and significantly above the longer-term average of around 16%. However, the increase in gold’s volatility should be viewed in the context of the volatility of all assets. Most assets saw volatility rise last year. For example, the volatility of the S&P 500 climbed to a whopping 32%, almost double its long-term average of 18%.4
Gold trading volumes also increased. The 2020 daily volume average of US$182.7bn per day was significantly above the 2019 average of US$145.7bn. Even gold’s lowest trading volumes for the year – which occurred during April or the relatively muted December – were still quite robust, trading on average US$139.9bn and US$143.2bn respectively.
Net long positioning of COMEX gold futures – as reported in the Commitment of Traders (COT) – fell to an annual low of 716t in November but recovered to 816t by year end. This was the highest level since September, below the annual average (873t) but significantly above the long-term 10-year average of 529t. Generally speaking, net longs were higher throughout the year because of positive price momentum, which attracted investors and speculators. We believe net longs did not finish the year at or above the all-time highs of 1,209t, which were seen earlier in the year, because the dislocation of the Comex futures market from the OTC market, which occurred in March, made it more expensive to hold futures compared to other choices like OTC and gold ETFs. Many investors likely migrated futures into OTC or gold ETFs, or likely shifted out of the gold market altogether.
Gold drivers in 2021
As we move into 2021, many of the same drivers of gold demand should continue, such as lower rates and improved opportunity costs, fiscal stimulus, lofty stock valuations, and the economic effects of COVID-19. We will dive deeper into some of these drivers in our upcoming 2021 Gold Outlook.
Strong inflows across all regions
- North American funds had inflows of 563t (US$31.9bn, 45% AUM)
- Holdings in European funds grew by 260t (US$13.3bn, 21%)
- Funds listed in Asia saw holdings rose by 38t (US$1.9bn, 49%)
- Other regions had inflows of 16t (US$899mn, 41%).
SPDR® Gold Shares and iShares Gold Trust led global inflows, adding over 50% of total global inflows
- In North America, SPDR® Gold Shares added 277t (US$15.4bn, 35%), iShares Gold Trust added 165t (US$9.5bn, 54%), followed by SPDR® Gold MiniShares, which rose by 43t (US$2.5bn, 217%)
- In Europe, UK-listed funds had the largest inflows, led by iShares Physical Gold (91t, US$4.9bn, 70%) and Invesco Physical Gold (84t, US$4.8bn, 67%). However, UK-listed WisdomTree Physical Gold (-26t, -US$1.5bn, -20%) also registered the largest level of outflows. Swiss-listed UBS ETF Gold (-23%) and UK-based Gold Bullion Securities (-6%), as well as German-listed Xtrackers Physical Gold (-28%), also saw sizeable outflows
- As fund assets in Asia grew, seven new Chinese funds were listed during the year.
Gold ETFs added nearly 231t more assets in 2020 (a total of 877t) than the 2009 record of 646t
- Despite record-setting inflows in the first 10 months of 2020, inflows turned negative in November and December, although they sharply reversed to begin 2021
- Investment demand for gold via ETFs remains strong and a primary driver of overall gold demand
- North American funds represented nearly two-thirds of global net inflows in 2020
- Low-cost gold-backed ETFs continue to grow meaningfully, even during the late year, with overall outflows more than doubling over the course of the year. 7