ETF Monthly commentary

Gold ETFs surpass 1,000 tonnes of new demand in 2020



September highlights

Gold-backed ETFs and similar products (gold ETFs) recorded their tenth consecutive month of net inflows during September, matching equivalent stretches in 2008 and 2016.1 Gold ETF holdings increased by 68.1 tonnes (t) (US$4.6bn) or 2.0% of assets under management (AUM) despite gold’s worst monthly price performance since November 2016. Global net inflows of 1,003t (US$55.7bn) in 2020 have led overall gold investment demand and taken the gold ETF holdings universe to a fresh new all-time high of 3,880t and US$235bn in AUM. 2


ETF flows2

ETF flows chart

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

Regional overview

Gold was one of several major assets, including stocks and broad-based commodities, that started the quarter strongly, reversed course in September, but closed the quarter higher. This was mirrored by a stronger US dollar that finished the quarter nearly 4% lower.

North American funds led global inflows once again, up 34.6t (US$2.2bn, 1.8% AUM). After seeing outflows in August, European funds added 26.0t (US$1.9bn, 2.0%) in September. Asian funds added 6.8t (US$432mn, 5.9% AUM) as two new funds launched in China for a second straight month, bringing the total number of new funds in the region to seven this year. Safe-haven demand and strong y-t-d returns in the domestic gold price fostered Indian fund inflows during the month. Finally, funds listed in other regions experienced small inflows of 0.6t (US$23mn, 0.6% AUM).

Strong Q3 inflows

Gold ETF holdings grew 7% during the third quarter, adding 273t or US$16.4bn in assets as the price of gold finished nearly 7% higher during the same period. North American funds remained the primary recipients of inflows. However, inflows in Asia stand out, as the region grew holdings by 17% and four new funds listed in China. Assets in Europe and other regions grew by 3% and 9% respectively.

Liquidity and positioning suggest increased strategic investment

Gold’s 3.6% September pullback was likely tactical in nature. Gold rallied sharply (22%) between April and July, reaching an all-time high in early August. When prices move this quickly there is often a subsequent pause or pullback in the price related to profit-taking or positioning. The recent Commitment of Traders (COT) report for gold COMEX futures of 759t (US$46bn) confirms reduced net long positioning. While still above the 2020 average of US$189bn, net long positioning has fallen nearly 40% since the February 2020 all-time highs of 1,209t (US$63bn).3 Volumes also fell from US$228bn in August to US$199bn in September. Notably, global gold ETF volumes fell to US$3.2bn from US$5.2bn the previous month. Despite the weaker prices, positioning and volumes, investment demand via gold ETFs increased, suggesting continued long-term strategic positioning.

The higher inflation allowance policy is gaining momentum in multiple regions

Last month, we noted that the US Federal Reserve would no longer pre-emptively increase rates to cool higher inflation, implying that rates could remain near zero for many years, and that this monetary policy philosophy could trickle into other regions, assuring negative global real rates for the foreseeable future. This appears to have been corroborated following the ECB’s announcement that it may consider allowing inflation to run higher for longer than usual. Subsequently, the improved opportunity cost of gold4 has helped investment demand so far in 2020, outweighing decreasing demand in the jewellery and central banks’ spaces.

The fourth quarter could be volatile

There are numerous catalysts for market volatility in the fourth quarter:

  • US - Market analysts believe there is a good chance the US Presidential election will be contested and unresolved for some time after election day. Moreover, contentious dynamics around the stimulus bill and the Supreme Court Justice nomination are already whipsawing markets
  • Europe - a no-deal Brexit scenario is possible and could disrupt trade in the region
  • Global - COVID-19 cases are on the rise as we move into the fall, with President Trump the most recent infected world leader.

On a positive note, economic indicators are improving in China, and during the holiday season there could be an uptick in consumer gold purchases as China single-handedly accounts for over 20% of annual gold demand. Additionally, India (the world’s second largest gold-consuming nation) has seen healthy monsoon rainfall for a second straight year—something that has not happened since the 1950s. This could soften the negative impact of COVID-19 in rural areas which have historically generated around 60% of Indian jewellery demand. Finally, the potential for a COVID-19 vaccine emerging during the quarter has gained momentum.

Regional flows5

European funds resumed strong inflows

  • North American funds had inflows of 34.6t (US$2.2bn, 1.8% AUM)
  • Holdings in European funds increased by 26.0t (US$1.9bn, 2.0%)
  • Funds listed in Asia saw holdings rise by 6.8t (US$432mn, 5.9%)
  • Other regions had inflows of 0.6t (US$23mn, 0.6%).

Individual flows

SPDR® Gold Shares and iShares Physical Gold collectively added over US$2bn in September

  • In North America, SPDR® Gold Shares led global inflows, adding 17.4t (US$1.1bn, 1.4%), followed by iShares Gold Trust, which added 12.8t (US$810mn, 2.5%); the low-cost space6 was fronted by SPDR® Gold MiniShares growing by 2.8t (US$169mn, 4.8%) with minimal to no flows in the other low-cost funds like Aberdeen Physical Swiss Gold Shares and Graniteshares Gold Trust
  • In Europe, iShares Physical Gold added 15.7t (US$984mn, 6.6%), followed by Invesco Physical Gold ETC, which added 12.3t (US$768mn, 5.6%). WisdomTree Physical Gold led global outflows with -5.6t (US$342mn, -3.8%) followed by Xtrackers Physical Gold ETC with -2.1t (US$127mn, -8.4%)
  • Two new funds were listed in China (BOC Shanghai China Gold ETF and CCB Principal Shanghai Gold ETF), collectively adding over 1t to the Asian region; Bosera’s listed fund led the region’s inflows with 2.0t (US$127mn, 11.9%).

Long-term trends

Gold ETFs have added more than 1,000t for the first time ever, surpassing the 2009 record of 646t.

  • North American funds have added 649t through the first three quarters
  • Collective gold ETF AUM have grown 67% y-t-d through September
  • Holdings in both tonnage and value terms continue to reach new highs
  • North American funds represent 2/3 of global net inflows on the year.


  1. Since the Financial Crisis, there have been three instances of ten straight months of inflows (June 2007 – March 2008, January 2016 – October 2016, and currently since December 2019).

  2. We regularly review the global gold-backed ETF universe and adjust the list of funds and holdings based on newly available data and information. After a standard periodic review of historical and current fund holdings and reported data, we discovered an inconsistency in the available WisdomTree Physical Gold EUR Daily Hedged fund data, which has been amended. This resulted in a net reduction of total gold holdings of approximately nine tonnes since 2018.

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

  4. As noted in our Gold mid-year outlook that—opportunity cost is one of the four key drivers of gold demand.

  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 of 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.

  6. Low-cost US-based gold-backed ETFs are defined as exchange traded open-ended funds listed in the US, backed by physical gold, with annual management fees of 20bps or less. At present, these include Aberdeen Physical Swiss Gold Shares, SPDR® Gold MiniShares, Graniteshares Gold Trust, and Perth Mint Physical Gold ETF.

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