On a y-t-d basis, the picture is one of strength, with all regions except Asia having seen inflows. But it was a tale of two halves. Demand for gold ETFs surged in Q1 to 273t – the highest level of quarterly inflows since Q3 2020 – propelled by gold price strength, equity market weakness, rapidly rising inflation expectations, and unexpected geopolitical events. This investment partially reversed in Q2, with outflows of 39t, as interest rate hikes and quantitative tightening came to dominate the narrative. But the fact that only a fraction of the Q1 inflows were unwound is a sign that much of this demand is ‘sticky’, more strategic in nature than tactical in our view.
At a regional level, North American and European funds attracted the lion’s share of investment. In H1, US fund holdings rose by 129t (US$8.1bn) and European funds added 119t (US$7.5bn). Funds in ‘other’ regions rose by a marginal 2t. Asia was the only region to see net outflows over the first half of 2022, declining by 16t with Chinese funds the main contributor. While the bulk of Chinese outflows occurred during Q1, impacted by the New Year holiday and tactical trading into a rising gold price, lower gold price volatility and profit-taking led to further outflows in Q2.
Investors around the world face a challenging environment during H2 2022, needing to navigate a noxious compound of rising interest rates, high inflation and geopolitical risks. In the near term, the gold price will likely remain sensitive to real rates, the speed at which global central banks tighten monetary policy, and their effectiveness in controlling inflation. Read more in our Mid-year Outlook report.
Gold trading volumes and futures demand subdued in June
Average daily trading volumes for gold totalled US$118.2bn in June, below the US$137.3bn average in May. Declines across OTC, exchanges and gold ETFs contributed to the m-o-m fall, although China was a bright spot with higher trading volumes on the Shanghai Gold Exchange and in Chinese gold ETFs in June. The latest Commitment of Traders (COT) report for Comex showed net long positioning declining marginally in June. In the week ending 28 June, net longs totalled 513t (US$30bn), down from 564t (US$33.4bn) at the end of May.
Western regions saw outflows in June, while Asian funds increased fractionally
- North American funds saw outflows of 26t (US$1.5bn, -1%)
- European funds fell by 4t (US$245.3mn, -0.2%)
- Funds listed in Asia had inflows of 1t (US$66.1mn, 1%)
- Funds in other regions were virtually flat with inflows of 0.1t (US$8.6mn, 0.2%).
In Europe, UK-listed funds iShares Physical Gold and WisdomTree Physical Swiss Gold registered the largest inflows, while SPDR® Gold Shares and iShares Gold Trust led global outflows
- In North America, SPDR® Gold Shares led outflows, with AUM dropping 18t (-US$1bn, -2%), while iShares Gold Trust lost 9t (-US$511.5mn, -2%). In the low-cost space, Goldman Sachs Physical Gold saw the largest inflows, with holdings rising 1t (US$47.4mn, 9%)
- In Europe, iShares Physical Gold grew by 8t (US$447.8mn, 3%) and WisdomTree Physical Swiss Gold rose by 1t (US$77.1mn, 3%). Invesco Physical Gold experienced the largest outflows, totalling 6t (-US$353.7mn, -2%)
- In Asia, Chinese ETF Guotai Gold saw inflows of 0.4t (US$24.4mn, 29%), but this was partially offset by outflows in Huaan Yifu Gold, which lost 0.3t (-US$20.1mn, -1%). Minimal flows were seen in other funds across the region.
H1 2022 gold ETF inflows remain strong despite outflows in Q2
- Following two consecutive months of net outflows in May and June, global holdings of gold ETFs are now 6% (+234t, US$14.8bn)) higher y-t-d, eclipsing 2021’s annual inflows of 173t
- Year-to-date, North American- and European-listed funds have absorbed a combined 248t of inflows. In contrast, holdings of Asian-listed funds are 16t lower y-t-d, due to fairly sizable outflows in China.