ETFs Add More Gold in April; Total Holdings Just Shy of Record
Gold-backed ETFs saw net inflows of gold for the fourth straight month in April.
ETFs globally added 42.8 tons of gold to their holding, with Europe-based funds leading the way.
The inflows in April brought total gold ETF gold holdings to 3,868.6 tons, just 1% (54 tons) below the all-time high of 3,922 tons charted in November 2020, according to data from the World Gold Council.
Rampant inflation, equity weakness, and geopolitical tension provided tailwinds for gold in April, but rapidly rising interest rates and the anticipation of an aggressive Federal Reserve inflation fight created headwinds late in the month.
Despite gold being under pressure, flows into gold ETFs were undeterred, with almost all regions seeing gains in assets under management (AUM).
Europe led the way with gold inflows of 25.9 tons. This lifted regional AUM to a new record high of 1,692 tons. Regional inflows were again concentrated in the UK, Germany and France. Funds in all three countries hit a record level of holdings during the month. According to the World Gold Council, “European investors continue to seek exposure to gold amid the backdrop of record-high inflation exacerbated by concerns over energy supplies, slower economic growth and geopolitical unrest.”
North American funds added 17.5 tons of gold in April.
While interest rate expectations rose during the month, investor concerns about slower economic growth and high inflation were unabated, driving demand for hedges such as gold and commodities.”
Asia was the only region charting a drop in ETF gold holdings with a modest decline of 1 ton. Selling from Chinese gold ETFs primarily drove the drop in net regional holdings. According to the WGC, Chinese investors are booking profits with the local gold price high.
ETFs in other regions including Australia saw net gold inflows of 0.5 tons.
So far in 2022, gold inflows totaling $19 billion have far surpassed the 2021 outflows of $9 billion.
In 2021, gold ETFs saw global outflows of 173 tons, as large North American funds lost assets in line with lower gold prices. The growing realization that the Fed is not going to be able to fight inflation without tanking the economy along with the geopolitical turmoil has given gold a boost through the first four months of 2022.
Inflows of gold into ETFs are significant in their effect on the world gold market, pushing overall demand higher.
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.