Larger US funds were the primary source of outflows in August, as was the case in July. Global low-cost gold ETFs3 as well as larger funds in the UK and Germany registered the largest inflows. Funds in North America lost 32.2t (-US$1.8bn, -1.7%) in contrast to European funds, which saw inflows of 9.6t (US$550mn, 0.6%). European inflows occurred against a backdrop of Eurozone inflation rising to its highest level in nearly a decade, while regional central banks cautioned that the economic recovery may be slower than expected due to COVID variant concerns. Conversely, outflows in North America were almost entirely driven by large US funds, with the two largest alone losing nearly US$2bn combined.
Despite price volatility throughout the month, low-cost gold ETFs across regions continued to attract inflows, including in the US where they helped partially offset outflows from larger funds. Overall, the low-cost space saw a combined US$112mn (1.9t) of inflows in North America and Europe. Asian-listed funds also saw inflows of 0.5% (0.8t, US$40mn), likely supported by weakness in Chinese equities and investors strategically allocating to gold following the price dip. Other regions detracted from global ETF growth with outflows of 0.8% (-0.5t, -US$30mn).4
Price performance and trading volumes
Gold ended the month about 0.6% lower at US$1,815/oz. Gold’s performance was dented by a rising dollar and higher yields in response to strong US jobs data and anticipation that the Federal Reserve would announce a tapering of bond purchases in 2021.5 As a result, gold remains approximately 4% lower on the year having not yet recovered from losses in June. Gold daily trading averages dropped to US$141bn per day in August, well below July levels of US$165bn and the y-t-d average of US$163bn. This was led by a decline in COMEX volumes to y-t-d lows, while net long positioning in COMEX gold futures increased to 712t (US$42bn) by month-end, the highest levels since early-June after recovering from initial declines in positioning following price volatility.6
Our short-term price performance model suggests that the price drop in August was driven by changes in momentum and interest rates. Despite a recovery in price in the second half of the month, the initial unexpected sharp early-hours selloff amid low liquidity conditions may have unnerved some investors, leading to reduced investment demand. Specific developments include:
- a recovery in US Treasury yields after declining for each of the previous four months
- a deceleration in ETF flows from July weighed down by outflows from North American funds.
Looking forward, while headwinds including central bank tapering may still exist for gold, some supporting factors are:
- an historically strong September bolstered by seasonal consumer demand and common investment flows
- persistently high inflation reports as well as elevated expectations across regions
- middling equity returns in emerging markets that have driven more investors to hedge portfolios
For more details see Gold Market Commentary, August 2021.
Outflows in North American funds outweighed inflows into European and Asian funds
- North American funds had outflows of 32.2t (-US$1.8bn, -1.7%)
- Holdings in European funds had inflows of 9.6t (US$550mn, 0.6%)
- Funds listed in Asia had net inflows of 0.8t (US$40mn, 0.5%)
- Other regions had outflows of 0.5t (-US$30mn, -0.8%).
SPDR® Gold Shares and iShares Gold Trust in the US drove global outflows in August, partially mitigated by inflows into Invesco Physical Gold in the UK
- In North America, SPDR® Gold Shares lost 31.2t (-US$1.8bn, -2.9%), while iShares Gold Trust had outflows of 3.7t (-US$210mn, -0.7%). On the other hand, SPDR® Gold MiniShares added 1.4t (US$81mn, 1.8%) while Sprott Physical Gold Trust had inflows of 0.8t (US$46mn, 0.9%), which helped to marginally offset some outflows
- In Europe, Invesco Physical Gold had inflows of 9.2t (US$529mn, 4.0%) and Xetra Gold added 2.7t (US$152mn, 1.1%), while iShares Physical Gold reduced holdings by 1.4t (-US$78mn, -0.6%)
- In Asia, inflows into Chinese funds Bosera Gold Exchange of 0.5t (US$28mn, 2.1%) and E Fund Gold of 0.4t (US$19mn, 2.4%) were partially offset by outflows from ICICI Prudential Gold ETF in India, which lost 0.3t (-US$21mn, -8.1%).
After heavy Q1 losses, ETF flows across most regions since April have remained generally positive while oscillating in North America amid rangebound gold prices
- Year-to-date, gold ETFs have seen global outflows of US$7.4bn (-141t) as larger funds, particularly in North America, have lost assets and moved in tandem with gold prices, while investment demand has grown in low-cost funds as well as Asia despite price fluctuations
- Despite slowing inflows in Q2, given a robust start to the year Asian gold ETFs have led global growth y-t-d, adding more than US$1.0bn (15%) as flows have become positive again recently
- After a rocky start to the year, European funds have swung back to net positive following improved investor sentiment supported by higher inflation expectations and a weaker growth outlook
- Low-cost ETFs, having posted inflows each month and growing by more than 40% y-t-d (58.1t), account for the vast majority of growth in European ETFs this year and now represent close to 6% of the total global gold ETF market.