Now gold ETF positive in 2018

US potential enough for

a recession in either 2019 or 2020

Long-dollar hedged gold is now

higher on the year, rallying over 6% in Q3

Holdings in global gold-backed ETFs and similar products rose in November by 21.2 tonnes (t) to 2,365t, equivalent to US$804mn in inflows, marking the second consecutive month of net inflows. Global gold-backed ETF flows are now positive in US dollar terms on the year. The price of gold was little changed (+0.2%) and global assets under management (AUM) rose by 1.1% in US dollars relative to October. 

Global stock markets remained volatile, although they ultimately ended the month mixed. Oil performance was a key story as the commodity fell more than 22% on the month amidst supply concerns. The US 2/10 Treasury yield curve flattened to near-low prices on the year as investors became concerned that US economic conditions may have peaked and could be showing potential for a recession in either 2019 or 2020. Long-dollar hedged gold is now higher on the year, rallying over 6% in Q3 with the improving gold and US dollar pricing.

November flows were positive across all regions. European funds led global inflows, with strong flows into UK-based funds as Brexit concerns increased and sterling weakened. North American funds saw inflows for a second straight month but remain negative on the year. Asian funds reversed two months of weak performance adding 2.3% to their assets.

Overall, gold trading volumes remained flat m-o-m, 10% below the y-t-d average. The LBMA announced a new reporting system for gold OTC trading volume (LBMA-i), which provides improved transparency into the liquidity of the gold market. Sentiment and positioning in COMEX futures remain bearish, well below historical averages. As discussed in our recent note Gold recoils amid selloff but may rebound, extreme bearish positioning in futures has historically preceded strong rallies in the price of gold.

Regional and fund-specific analysis of gold holdings and flows in USD learns, Gold-backed ETFs and similar products account for a significant part of the gold market, with institutional and individual investors using them to implement many of their investment strategies. Flows in ETFs often highlight short-term and long-term opinions and desires to holding gold. The data on this page tracks gold held in physical form by open-ended ETFs and other products such as close-end funds, and mutual funds. Most funds included in this list are fully backed by physical gold.

 

Regional fund flows:

Holdings in European funds rose by 10.5t (US$372mn, 0.9% AUM)

North American funds had inflows of 8.4t (US$353mn, 0.8%)

Funds listed in Asia increased by 2.1t (US$72mn, 2.3%)

Other regions saw a small increase in holdings of 0.2t (US$7mn, 0.6%)

Individual flows:

SPDR Gold Shares led global inflows, gaining 7.7t (US$309mn, 1.1%), followed by iShares Physical Gold which gained 5.4t (US$207mn, 6.3%), and Gold Bullion Securities 2.1t (US$82mn, 2.7%) -both in the UK- as well as Huaan Yifu Gold, in China, which added 2.7t (US$104mn, 13.3%).

Low-cost gold-backed ETFs in the US continue to add assets as strategic holders increase holdings. Funds with outflows were few but were led by Invesco Physical Gold, which lost 2.0t (US$78mn, 1.8%) and Bosera Gold, which was down 1.1t (US$45mn, 9.5%).

Year-to-date trends:

Collectively, US dollar flows in gold-backed ETFs are now positive having raised US$354mn (0.40% AUM), despite the recent trend driven by a strong US dollar and bearish gold market sentiment. North America reported a second monthly inflow after six consecutive months of outflows but remain negative on the year by 50.0t (US$2.1bn, 4.6%).

By contrast, European funds continue to see net positive inflows with $2.9bn coming in (7.1%) y-t-d

After starting the year strong, Asian funds have given up all their gains and are now negative losing 1.5% of their assets y-t-d.