Monthly regional overview
Positive inflows continued during October, albeit the lowest monthly increase in 2020, as most risk assets, like stocks, were lower on the month. Nearly all the net inflows came from European funds which added 20.2t (US$1.4bn, 1.4% AUM). North American funds added a nominal amount of 1.8t (US$166mn, 0.1%). Asian funds had small inflows of 1.1t (US$76mn, 1.0%), while funds listed in other regions experienced significant outflows relative to their size of 2.8t (US$144mn, 3.8%).
Quiet volumes and stable positioning, with rising implied volatility
Daily gold trading volumes fell meaningfully in October, to US$159bn, below the y-t-d average of US$186bn. This was largely driven by lower COMEX gold futures volumes—29% below the 2020 daily average. Net long positioning, via the recent Commitment of Traders (COT) report for gold COMEX futures, showed stable positioning at 766t (US$46bn)2, well below the average in 2020, but still above the long-term average. Short-term implied volatility in gold—or the expected future movements—increased from 17 to 20, not unexpected ahead of the US election, but put/call skew remained relatively flat—suggesting no expected directional bias in future prices.
Global uncertainties remain as gold demand trends continue
The official US election day came and went, but uncertainty over the results will likely continue for some time. As we recently noted in Gold and the US election, the fundamental support for gold investment demand is unlikely to change regardless of the Presidential victor.
Our Q3 Gold Demand Trends highlighted a common 2020 theme. The global pandemic continues to hurt the economy, which in turn is negatively impacting consumer demand for jewellery and technology. On the flip side, investment demand, primarily through gold ETFs remains strong.
Given the recent uptick in global COVID-19 cases, geopolitical and market uncertainty, and the expected long term, low-rate environment that improves gold’s opportunity cost3, we do not see this scenario changing in the coming months.
European funds drove nearly all net inflows
- Holdings in European funds increased by 20.2t (US$1.4bn, 1.4% AUM)
- North American funds had inflows of 1.8t (US$166mn, 0.1%)
- Funds listed in Asia saw holdings rise by 1.1t (US$76mn, 1.0%)
- Other regions had outflows flows of 2.8t (US$144mn, 3.8%).
WisdomTree Physical Gold GBP Hedged and iShares Physical Gold collectively drove global inflows in October
- In North America, iShares Gold Trust added 9.0t (US$557mn, 1.8%), followed by SPDR® Gold MiniShares5 which grew by 2.5t (US$152mn, 4.3%) as SPDR® Gold Shares led global outflows, losing 11.2t (US$648mn, 0.8%)
- In Europe, WisdomTree Physical Gold GBP Hedged added 10.2t (US$633mn, 88%), followed by Invesco Physical Gold ETC, which added 3.0t (US$182mn, 1.3%). Both funds are listed in the UK. In France, Amundi Physical Gold led European outflows with 2.7t (US$167mn, 4.3%) coming out of the fund
- In other regions, 1nvest Gold ETF lost 56% of its assets with outflows of 2.3t (US$137mn) during the month
Gold ETFs have added more than 1,000t for the first time ever, surpassing the 2009 record of 646t.
- Collective gold ETF flows have added US$57bn y-t-d through October
- Holdings in both tonnage and value terms continue to reach new highs
- North American funds represent nearly 2/3 of global net inflows on the year.