Against a backdrop of easy monetary policy by global central banks, continued geopolitical uncertainty (including the looming Brexit deadline and tensions in the Middle East), as well as rising turmoil in Congress, global gold-backed ETFs and similar products had net inflows across all regions in September.
Inflows of $3.9bn across all regions drove holdings to exceed late 2012 levels, when the price of gold was 18% higher than current levels near $1,700/oz.
Global demand for gold-backed ETFs remains strong despite global rates increase. Gold remained near all-time highs in every major G10 currency, except the US dollar and Swiss franc.
Positive sentiment towards gold was also reflected in COMEX net longs which reached all-time highs during the month.
Asia comprises 4.6% of global holdings
On a regional level, North American and European-listed funds comprised 52% and 44% of global holdings respectively, with the remainder coming from funds listed in Asia and other regions:
- North American funds led September’s flows, adding 62 tonnes ($3.1bn, 4.5% AUM)
- European-listed funds rose by 7.7 tonnes ($586mn, 1.0%), mainly in the UK, as investors positioned for an impeding 31 October Brexit decision
- Asian funds added 3.9 tonnes ($187m, 4.6%)
- UK-based fund holdings continue to make all-time highs, reaching 582 tonnes or 21% of global gold-backed ETF assets in September
Juan Carlos Artigas, director of investment research at the World Gold Council, outlined several potential positive catalysts for gold in October.
“First, global uncertainty continues. The US House of Representatives initiated a preliminary inquiry as to whether to proceed with a formal impeachment investigation of President Trump; a move that could negatively impact risky assets and drive China to potentially delay trade solutions until the 2020 Presidential election.
“In addition, the deadline for a Brexit decision falls at the end of October, and there is still uncertainty as to whether there will be a ‘No Deal Brexit’ or a deadline extension.
“Second, despite the increases during September, interest rates worldwide remain low; we estimate that over 80% of sovereign debt is trading with negative real rates, lowering the opportunity cost of investing in gold.
“Finally, the US stock market is trading near all-time highs and, historically, October is a month when some of the sharpest historical down-moves in stock performance are seen; the most recent of which was last year when the S&P 500 fell 7% during the month. On the flip side, continued dollar strength and a deceleration in gold consumer demand in India and China could create headwinds.”
London-based World Gold Council is the market development organisation for the gold industry, whose members comprise some of the world’s biggest gold mining companies, with operations in India, the Far East and the US.