Gold ETF Flows: October, 2022

Outflows slowed in October, but holdings now down y-t-d

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Highlights

  • Global gold ETFs saw a net outflow of 59t (US$3bn) in October, the sixth straight month of declines in holdings
  • iShares Gold Trust and SPDR® Gold Shares led global outflows
  • In October, y-t-d changes in gold ETF holdings turned negative for the first time in 2022, now 1% lower on the year

Global gold ETFs saw a net outflow of 59t (US$3bn) in October, the sixth straight month of declines in holdings.1 But October’s outflow was less pronounced than September’s (-95t) as the gold price held relatively steady. Headwinds from persistent dollar strength and rising yields were partially offset by higher inflationary concerns. For more analysis of gold’s performance, please see: Gold Market Commentary.

October tipped the y-t-d performance of global gold ETFs into net outflows, now down 52t (US$785mn). Nonetheless, the 1% fall in tonnage holdings so far is much milder than the 9% drop in the gold price.2 Gold ETFs saw a strong start to 2022 as intensifying geopolitical risks and rising inflationary concerns drove net inflows of 316t between January and April. However, a strong dollar alongside an increasingly hawkish US Federal Reserve (Fed) resulted in net outflows of 368t from May to October. At the end of the month, total asset under management (AUM) stood at nearly 3,490t (US$184bn), the lowest since April 2020 in tonnage terms.

October highlights

All regions experienced tonnage outflows in October, although to varying degrees. Due to their dominant market shares, funds in North America (-40t, US$2bn) and Europe (-14t, US$750mn) led global outflows. Top US funds saw the largest reduction in holdings globally, possibly driven by fears over another 75bp rate hike from the US Fed in November and a stubbornly high dollar. In the European area, UK listed funds (-13t, US$711mn) led outflows as political and economic turmoil clouded market sentiment. Another 75bp rate hike from the ECB may have played a key role in driving outflows from Germany funds (-3t, US$144mn).

Asian outflows during October were entirely contributed by Chinese funds (-6t, -US$308mn). It was likely a result of Chinese investors’ profit-taking activities as the RMB gold price capped another monthly gain. Meanwhile, funds in other regions saw a minor outflow of 0.02t (US$0.5mn).3

 

ETF flows chart

Data as of

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

Gold market sentiment remains cloudy

Daily trading volumes ground lower in October, averaging US$114bn in the month, 12% lower than September. M-o-m falls were seen across the board with exchange-traded derivatives registering the largest decline (16%). According to Commitment of Traders (COT) reports, net managed money positioning has been swinging between net longs and net shorts during October as investors weighed intensifying inflation expectations against the Fed’s hawkish path. Towards the end of October, net managed money position totalled -103t, a slim rebound from September’s -128t.4

Regional flows5

All regions saw outflows

  • North American funds saw outflows of 40t (US$2bn, 2%)
  • European holdings declined by 14t (US$750mn, 1%)
  • Asian funds lost 5t (US$256mn, 4%)
  • Other regions were virtually unchanged with a 0.02t (US$0.5mn, 0.01%) outflow

Individual flows (Oct)

iShares Gold Trust and SPDR® Gold Trust in the US as well as Invesco Physical Gold ETC and iShares Physical Gold ETC in the UK drove global outflows during October

  • In North America, iShares Gold Trust led outflows, with holdings declining by 21t (US$1bn, 4%), followed by SPDR® Gold Trust which lost 19t (US$988mn, 2%)
  • In Europe, UK funds saw the largest outflows as Invesco Physical Gold ETC lost 4t (US$235mn, 2%) and iShares Physical Gold ETC saw its AUM declining by 3t (US$183mn, 1%); meanwhile, ZKB Gold ETF in Switzerland capped the region’s largest inflow of 1t (US$81mn, 1%)
  • In Asia, outflows were entirely contributed by Chinese ETFs: Huaan Yifu registered a 14% (4t, US$198mn) AUM drop while E Fund lost 1t (US$63mn, 11%)

Long-term trends

  • In October, y-t-d changes in gold ETF holdings turned negative for the first time in 2022, now 1% lower on the year in tonnage terms6
  • Flows from larger, liquid funds continued to move with the price of gold, while low-cost funds remained positive
  • European funds led global y-t-d inflows

Footnotes

  1. 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. We have made a few adjustments and improvements to our calculation methodology as of 1 August 2021 that will impact historical and future data. Specifically, we revised the methodology used to estimate changes in gold holdings as described below: Previously, changes in tonnes were calculated by converting a fund’s AUM (in USD) into gold holdings (in tonnes) and computing the difference over periods. However, currency movements and large daily and weekly gold price movements could distort the difference between tonnage change and US-dollar fund flows during brief time horizons. We therefore adjusted tonnage change as a function of fund flows versus AUM and replaced the tonnage change field with fund flows (tonnes).

  2. Percentage changes in tonnage holdings based on the y-t-d net outflows in 2022 and holdings at 31 December 2021. Gold price changes based on the LBMA Gold Price PM between 31 December 2021 and 31 October 2022.

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

  4. Comparison made between positioning data on 27 September 2022 and 25 October 2022.

  5. 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. We have made a few adjustments and improvements to our calculation methodology as of 1 July 2021 that will impact historical and future data. Specifically, we revised the methodology used to estimate changes in gold holdings as described below:

    • Previously, changes in tonnes were calculated by converting a fund’s AUM (in USD) into gold holdings (in tonnes) and computing the difference over periods. However, currency movements and large daily and weekly gold price movements could distort the difference between tonnage change and US-dollar fund flows during short time horizons. We therefore adjusted tonnage change as a function of fund flows versus AUM and replaced the tonnage change field with fund flows (tonnes).
    • Now, for most funds, we estimate US-dollar fund flows, as described in section 2.3.2 below, and then convert those flows to fund flows (tonnes).
    • Fund flows (tonnes) and US-dollar fund flows will now represent a more aligned explanation of investment demand for gold ETFs, while the true holdings of a fund, in US dollars and tonnage, will remain a close estimate, impacted by the currency and price volatility described above.
    • Based on our initial analysis, the changes are not likely to have a material long-term effect on historical information, particularly on a global or regional aggregate basis, but will adjust short-term fluctuations that can sometimes occur due to input data and timing variations.
  6. Percentage changes in tonnage holdings based on the y-t-d net outflows in 2022 and holdings at 31 December 2021.