May regional overview
Larger funds in the US, UK and Germany were once again the primary driver of flows, flipping to net inflows. North American funds added 34.5t (US$2.1bn, 2.0%). European funds saw inflows of 31.2t (US$1.6bn, 1.9%). Funds in 'Other' regions lost 1.9% of assets (-1.0t, -US$69mn).3 Asian-listed funds had outflows for a second straight month (-US$210mn, -2.7%) coming almost entirely from China, which had strong local stock market strength. Asia does, however, remain the strongest region in terms of percentage growth this year, having added 11% to holdings, or 13.8t through the end of May.
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 6.3t (US$366mn, 26%) into Xtrackers IE Physical Gold and 1.5t (US$92mn, 2.2%) into SPDR® Gold MiniShares during May. The 8.3t of net inflows in the low-cost space represented 13% of net global inflows during the month. The 181t of low-cost assets now represents 5% of the total global gold ETF market compared with less than 3% a year ago.
Price performance and trading volumes
Gold finished the month 7.5% higher at US$1,900/oz, breaking through resistance.5 Gold is now effectively flat on the year, rallying 13% in the last two months. We recently discussed gold’s stable volatility behaviour in our Investment Update: Time to realise gold’s true volatility, which highlights potential opportunities in the gold derivatives market and how gold’s volatility profile is key to its strength as a portfolio diversifier.
Gold daily trading averages rose meaningfully during May to US$176bn, after falling for two straight months. This is slightly higher than the 2021 average of US$165bn and below the 2020 average of US$183bn, more in line with the 2019 average of US$146bn. Net long positioning, via the recent Commitment of Traders (COT) report for gold COMEX futures, moved higher to 725t (US$44bn),6 the highest since early February 2021, but below the 2020 average net long level of 871t (US$53bn).7 The average weekly net long positioning historically remains around 500t (US$31bn).8
Our short-term price performance model suggested that all but two of the underlying variables we use had a positive contribution to gold’s performance – the first month this has happened since June 2011. We also believe the recent strength of gold is due to a function of:
- higher inflation expectations
- the weaker US dollar
- positive gold sentiment and price momentum.
Anecdotally, some additional supporting factors include:
- gold prices catching up to other commodities ‘reflation’ strength910
- strong Holiday demand in China, and
- increased central bank demand.
For more details see Gold Market Commentary, May 2021.
Large North American and European funds drove inflows
- North American funds had inflows of 34.5t (US$2.1bn, 2.0%)
- Holdings in European funds rose by 31.2t (US$1.6bn, 1.9%)
- Funds listed in Asia had net outflows of 3.3t (-US$210mn)
- Other regions had outflows of 1.0t (-US$69mn, 1.9%).
SPDR® Gold Shares (US) led global inflows in May, followed by iShares Physical Gold Trust (UK)
- In North America, SPDR® Gold Shares added 26.2t (US$1.6bn, 2.7%), followed by iShares Gold Trust, which added 4.8t (US$296mn, 1.1%). SPDR® Gold MiniShares had holdings rise by 1.5t (US$92mn, 2.2%), while Aberdeen Physical Gold Shares added 0.4t (US$27mn, 1.2%)
- In Europe12, iShares Physical Gold ETC added 8.8t (US$510mn, 4.0% and Invesco Physical Gold added 6.4t (US$383mn, 3.1%)
- In Asia, Bosera Gold led outflows with 1.7t (-US$103mn, -8.7%) coming out of the fund, followed by Huaan Yifu, which lost 1.2t (-US$68mn, 3.9%)
- 1nvest Gold was a standout in other regions. The South African fund lost 1.5t or 52% of its assets during the month.
Global gold ETF AUM bounced back and is only 9% below the all-time August 2020 highs
- Large US funds continue to drive net global inflows in both directions
- Gold ETF flows have started to catch up to the gold price rebound over the past few months
- Asian gold ETF holdings growth remains above 11% in 2021, but has slowed over the past two months.
We regularly assess our calculation methodology to ensure the most accurate and up-to-date data for our ETF holdings and flows. In this context, we have improved our estimation of Xetra-Gold holdings and their change over time based on the fact that 1,000 units of the fund represent 1 kilogram of gold whereas other funds decrease the amount of gold backing each unit to cover management fees. It is important to note, however, that regardless of their structure, most funds we include in our gold ETF universe are fully backed by physical gold. While a few funds allow other holdings such as cash or derivatives, we only monitor those investing at least 90% through physical gold and appropriately adjust their reported assets to estimate their physical holdings only. For more information, see our Methodology note.