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ETF Gold Holdings Increase for Third Straight Month and Go Positive on the Year

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Gold-backed funds reported an inflow of gold for the third straight month in May, flipping global ETF demand positive on the year.

Globally ETFs added 19 tons of gold to their holdings in May. Gold-back funds held 3,478 tons of metal as of the end of the month. That represents a 6-ton increase on the year and is the highest level since October 2022.

Total ETF gold holdings remain 11% lower than their record high of 3,919t tons in October 2020.

With the price of gold dipping late in the month, total assets under management (AUM) fell slightly by 0.4% to $220 billion.

According to the World Gold Council, ETF flows have been driven primarily by price movements.

Strong price momentum earlier in the month incited investors’ interests in gold ETFs before giving some back towards the end of May as the gold price pulled back. In addition, we believe that US debt ceiling negotiations and looming banking industry concerns also led investors to seek safe-haven assets, contributing to the positive trend in May.”

Gold flows into ETFs were muted earlier this year even as physical gold investment demand rose close to record levels in the first quarter of 2023.

North American gold ETFs charted net inflows for the third consecutive month, accumulating another 21.2 tons of gold. That brought year-to-date inflows of gold to 47 tons. North American funds held 1,773.7 tons of gold at the end of May. That’s the highest level since September 2022.

European-based funds reported net outflows of 2 tons. Persistent inflation in the eurozone has increased expectations that the European Central Bank will push interest rates higher, and that has created headwinds for gold. So far this year, 42.9 tons of gold flowed out of European funds.

Asian funds charted modest net inflows of 0.1 tons of gold. Outflows from Chinese funds were offset by Japanese and Indian inflows. Flows of gold into Asian funds have been relatively flat on the year, falling by 0.5 tons.

Funds in other regions also posted a small net inflow of 0.4 tons. ETFs in Turkey, Australia and South Africa all contributed to the positive flow. Sizeable inflows of gold into Turkish funds driven by local political and economic uncertainty pushed inflows positive year-to-date to the tune of 2.7 tons.

Inflows of gold into ETFs are significant in their effect on the world gold market, pushing overall demand higher.

There’s a difference between investing in gold-backed ETFs and physical gold. Learn more here.

ETFs are backed by physical gold held by the issuer and are traded on the market like stocks. They allow investors to play gold without having to buy full ounces of gold at spot price. Since their purchase is just a number in a computer, they can trade their investment into another stock or cash pretty much whenever they want, even multiple times on the same day. Many speculative investors appreciate this liquidity.

There are good reasons to invest in ETFs, but they aren’t a substitute for owning physical metal. In an overall investment strategy, SchiffGold recommends buying gold bullion first.

When considering gold-backed ETFs, you should always keep in mind that you don’t actually own the gold. Buying the most common ETFs does not entitle you to any actual amount of the precious metal.

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