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ETF Gold Holdings Set Yet Another Record

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Gold continued to flow into gold-backed ETFs, setting another all-time record in April.

Globally, funds added another 170 tons of gold last month amounting to $3.9 billion, according to the latest data from the World Golf Council. It was the sixth straight month of net inflows.

April’s inflows pushed total ETF gold holdings globally to a record of 3,355 tons. Assets under management (AUM) also reached a new record high of US$184 billion as gold in US dollars moved higher by 5.8%.

This continues an upward trend. Gold-backed ETFs added over 460 tons of gold through the first four months of 2020. Gold ETF assets have grown 80% in the past year. Rolling 12-month inflows of 879 tons slightly surpassed those of 2009 and 2016.

North American funds accounted for the bulk of inflows last month, increasing holdings by 144 tons. SPDR Gold Shares led global inflows, adding 89.5 tons (US$4.9bn, 9.7%).

European funds added an additional 20 tons. Asian ETFs also charted strong inflows of 2.9 tons, primarily into Chinese-based funds. Other regions, including Australia, had inflows of 3.3 tons.

Looking more broadly at the gold investment market, the yellow metal in US dollars finished the month above $1,700 – a monthly closing level not seen since 2012. While gold remains 10% below all-time highs in dollar terms, it continued to make all-time highs in every other major currency, including Australian and Canadian dollars, euro, pounds, yen, and yuan. Gold also made a new high in Swiss francs during April.

According to the World Gold Council, at the time of its report, gold had outperformed most major asset classes in 2020. The yellow metal was up by more than 11% in US dollar terms.

And while bond and stock prices also rallied in April, supported by a very accommodative global monetary policy stance, investors are likely to face more volatility, especially since indices like the S&P 500 experienced their strongest monthly performance since 1987. The recent market volatility and price behavior of broad-based global assets provided an opportunity to highlight gold’s effectiveness as a hedge.”

According to WGC analysis, gold continues to behave similarly to the way it did in the 2008 financial crisis. As we have explained, gold dipped initially and then rallied as central bank monetary policy started to bite. The timeframe has been contracted in this crisis and the central bank easing has been on hyperdrive.

As noted in our March Gold ETF flows report, the price strength of gold has, so far, mirrored that of the Global Financial Crisis. At that time it rallied back following the initial Quantitative Easing (QE) program in the US, which, along with similar monetary policy interventions worldwide, propelled gold over 130% higher at its peak in September 2011.”

The WGC report concluded that “uncertainty, along with the unknown ability of central banks to support the markets, that could continue to drive investment demand for gold.”

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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