ETF Monthly commentary

Gold ETF outflows continue, but slow with gold price strength

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April highlights

Global gold ETFs lost 18.3t tonnes (t) (-US$1.1bn, -0.5% AUM) in April, marking outflows for five of the past six months. However, global outflows slowed significantly, as European funds added assets for the first time since January. Global assets under management (AUM) stand at 3,567t (US$203.0bn),1  after slipping below $200bn for the first time in over a year during March. Since the peak asset levels in November 2020, gold ETF AUM has fallen nearly 14%, with 8% coming from outflows and 6% coming from the gold price selloff in US dollar terms.2 

 

ETF flows chart

Data as of

Sources: Bloomberg, Company Filings, ICE Benchmark Administration, World Gold Council; Disclaimer

April regional overview

North American funds, particularly in the US, represented nearly all the global outflows as the region lost 28.4t (-US$1.6bn, -1.6%). In contrast, European funds saw inflows of 10.6t (US$514mn, 0.6%), from funds across France, Switzerland, and the UK. Funds in 'Other' regions also experienced net inflows but they were considerably smaller in magnitude.3  Asian-listed funds reversed their 2021 strength with very minor outflows of 0.5t (-US$13mn) led by China, which lost 2.0t (-US$111mn, -2.8%). However, funds in India continued to grow, adding 1.3t (US$84mn, 4.4%) during the month.

Low-cost gold ETF segment continues to grow 4

We continue to see strong inflows into low-cost ETFs across the globe, most recently evidenced by 1.7t (US$93mn, 473%) into WisdomTree Core Physical Gold in London and 1.3t (US$74mn, 1.9%) into SPDR® Gold MiniShares during in April. In addition, late last month, there were inflows of approximately 27.5t or US$1.6bn into three low-cost Xtrackers funds, which coincided with equivalent outflows from three of their higher-fee funds, which may indicate a transfer to the newer structures.  

Price performance and trading volumes

Gold finished the month 4.5% higher at US$1,768.1/oz, flirting but failing to break through resistance at US$1,800/oz during the second half of April.5 Gold remains 6.5% lower during the year, while its implied price volatility continues to fall and is back to the early 2020 pre-COVID levels of 14%.6  This is well below gold’s realised volatility levels of 20% last year and lower than its historical  20-year realised volatility of 16%. 

Gold daily trading averages fell significantly for a second straight month, averaging US$138bn per day during April. This is 25% below the 2020 average of US$183bn, more in-line with the 2019 average of US$146bn. The decrease in April was largely a function of lower COMEX futures volumes reported through the LBMA Trade Data. Net long positioning, via the recent Commitment of Traders (COT) report for gold COMEX futures, ticked higher to 540t,7  well below the 2020 average net long level of 871t.8

Market Commentary:

Our short-term price-performance model suggests that the primary driver of gold’s recovery during April was a weaker US dollar, alongside declining interest rates, impacting the opportunity cost of holding gold as sensitivity to these variables remains elevated.9  We also believe the recent strength in gold was a function of:

  • The weaker US dollar
  • Gold prices catching up to other commodities ‘reflation’ strength1011  
  • Increased fiscal stimulus and continued central bank support

For more details see Gold Market Commentary, April 2021.

Regional flows12

US funds continue to weigh on global gold ETF demand

  • North American funds had outflows of 28.4t (-US$1.6bn, -1.6%)
  • Holdings in European funds rose by 10.6t (US$514mn, 0.6%)
  • Funds listed in Asia had net outflows of 0.5t (-US$13mn)
  • Other regions had minor inflows.

Individual flows

SPDR® Gold Shares (US) led global outflows in April, followed by iShares Gold Trust

  • In North America, SPDR® Gold Shares lost 20.4t (-US$1.1bn, -2.0%), followed by iShares Gold Trust, which lost 8.2t (-US$458mn, -1.7%). SPDR® Gold MiniShares had holdings rise by 1.3t (US$74mn, 1.9%), while Graniteshares Gold Trust added 0.5t (US$30.3mn, -4.2%)
  • In Europe13, Amundi Physical Gold added 3.7t (US$217mn, 7.3%), while iShares Physical Gold added 1.9t (US$124mn, 1.0%). WisdomTree Physical Gold lost 3.4t (-US$190mn, -3.1%)
  • In Asia, two Indian funds ICICI Prudential Gold and Nippon India combined to add 1t (US$60mn), while Huaan Yifu Gold lost 1.5t (-US$81mn, -4.7%.

Long-term trends

Global AUM has fallen over 20% since the August 2020 high

  • The downward trend in overall global flows continues to be dominated by US funds
  • Gold ETF flows have been largely correlated with gold prices and interest rates in recent months, but have yet to ‘catch up’ to gold strong April performance
  • Asian gold ETF holdings continue to grow assets despite other regions faltering.

Footnotes

  1. We regularly review the global gold-backed ETF universe and adjust the list of funds and holdings based on newly available data and information.

  2. Based on the LBMA Gold Price PM as of 30 April 2021.

  3. ‘Other’ region includes Australia, South Africa, Turkey, Saudi Arabia, and the United Arab Emirates.

  4. Low-cost US-based gold-backed ETFs are defined as exchange-traded open-ended funds listed in the US and Europe, backed by physical gold, with annual management fees and other expenses like fx costs of 20bps or less. At present, these include Aberdeen Physical Swiss Gold Shares, SPDR® Gold MiniShares, Graniteshares Gold Trust, Goldman Sachs Physical Gold ETF, CI Gold Bullion Fund, WisdomTree Core Physical Gold, and Xtrackers IE Physical Gold ETC.

  5. Based on the LBMA Gold Price PM as of 30 April 2021. 

  6. Implied volatility based on the 3-month at-the-money call option in COMEX gold futures.

  7. As of 30 April 2021.

  8. Net longs represent Money Manager and Other Net long positioning in the COMEX futures market.

  9. We calculate gold-backed ETF flows both in ounces/tonnes of gold and in US dollars because these two metrics are relevant in understanding funds’ performance. The change in tonnes gives a direct measure of how holdings evolve, while the dollar value of flows is a finance-industry standard that gives a perspective on how much investment reaches the funds. There are some months where the reported flows measured in tonnes of gold and their dollar-value equivalent seem inconsistent across regions. Both figures are correct. The disparity is due to the interaction between the performance of the gold price intra-month, the direction and movement of the US dollar, and the timing of the flows. For example, hypothetically, if European funds were to experience outflows early in the month, when the price of gold was low, but gained assets later in the month when the price of gold increased, and/or if the euro/dollar currency rate moved meaningfully when there were flows, there might be a discrepancy between tonnage change and flows.

  10. We do not directly discuss the Xtrackers individual fund flows in the section given the direct movement between the parent company funds.

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