The primary driver of global outflows was North American funds, as momentum investors took profits using these, the most liquid of the US-based funds. However, we continued to see inflows into low-cost ETFs2, a factor we believe is linked to strategic allocations. Funds in Asia also experienced outflows of 5%, while European and Other regions were flat. We continue to see inflows into UK-based funds, likely driven by Brexit. The 506t of current holdings stands at an all-time high.
Net outflows in gold-backed ETFs occurred as global stock markets continued their upward trend, moving up 2% on the month. They now stand 8% higher over the first two months of the year, their strongest start in three decades. However, market uncertainty remains a concern: US/China trade relations, Brexit uncertainty, economic slowing and lofty stock market valuations are worrying investors. In addition, the Fed has signalled a ‘wait and see’ approach which may influence the rate at which other central banks tighten monetary policy. Both monetary policy and the direction of the US dollar will be a key driver for gold this year and may support gold investment (see our 2019 Outlook).
In February, gold trading volumes decreased 5% below the 2018 averages to US$104bn per day. Although sentiment and positioning in COMEX futures increased from their lows, as the price of gold moved higher during the first half of the month, they remain below net longs (Note: data is still delayed by two weeks following the US Government shutdown).
Regional flows1
North American funds led global outflows losing 2% of their assets
- North American funds had outflows of 29t (US$1.2bn, 2.3% AUM)
- Holdings in European funds were flat (tonnage loss but fund inflows) -0.3t (+US$37mn, 0.1%) 1
- Funds listed in Asia decreased by 3t (US$147mn, 4.6%)
- Other regions were virtually flat, falling by 0.1t (US$2.5mn, 0.2%)
Individual flows
SPDR® Gold Shares and Huaan Yifu led global outflows
- In North America, SPDR® Gold Shares led global outflows, losing 40t (US$1.7bn, 4.8%), while iShares Gold Trust added 7t (US$299mn, 2.4%) followed by SPDR® Gold MiniShares adding 3t (US$122mn, 24%)
- European inflows were led by ETFS EUR Daily Hedged Gold and Invesco Physical Gold, both of which added 2t or ~US$90mn. ETFS Physical Gold, in the UK, had outflows of 3t (US$106mn, 1.5%)
- In China, Huaan Yifu had significant outflows of 3t (US$121mn, 10%)
Long-term trends
ETF holdings have grown 2% in 2019
- Outflows in February halted the upward trend that began in Q3 2018; however, flows remain positive for 2019 with collective inflows of 39t (US$1.7bn, 2%)
- Total holdings in tonnes (2,479), remain near levels last seen in early 2013, when the price of gold was 23% higher
- Low-cost ETFs added 20t (US$~800mn) in the past seven months, representing growth of 67%2
**Note: 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. This month, 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 of the dollar and the timing of the flows. For example, Europe experienced outflows early in the month when the price of gold was low but gained assets later in month when the price of gold increased.
***Low-cost US-based gold backed ETFs are defined as gold-backed ETFs that trade on US markets with annual management fees of 20bps or less.
