Gold ETF October match the record April 2006

Gold ETF inflows continued, but at a significantly lower pace 

Announcing October highlights World Gold Council (WGC) reports that the Gold-backed ETFs and similar products (gold ETFs) recorded their 11th consecutive month of net inflows during October, matching the record number of positive monthly flows set in April 2006. 

Gold ETF holdings increased by 20.3 tonnes (t), +US$1.4bn or 0.6% of assets under management (AUM), during the month as the gold price moved mostly sideways, finishing slightly below US$1,900/oz. Net inflows of 1,022t (US$57.1bn) in 2020, so far, have driven global gold ETF holdings to a new all-time high of 3,899t (US$235bn in AUM).

By furnishing monthly regional overview, WGC reported positive inflows continued during October, albeit the lowest monthly increase in 2020, as most risk assets, like stocks, were lower on the month. Nearly all the net inflows came from European funds which added 20.2t (US$1.4bn, 1.4% AUM). 

North American funds added a nominal amount of 1.8t (US$166mn, 0.1%). Asian funds had small inflows of 1.1t (US$76mn, 1.0%), while funds listed in other regions experienced significant outflows relative to their size of 2.8t (US$144mn, 3.8%). 

Quiet volumes and stable positioning, with rising implied volatility, daily gold trading volumes fell meaningfully in October, to US$159bn, below the y-t-d average of US$186bn. This was largely driven by lower COMEX gold futures volumes 29% below the 2020 daily average. 

Net long positioning, via the recent Commitment of Traders (COT) report for gold COMEX futures, showed stable positioning at 766t (US$46bn), well below the average in 2020, but still above the long-term average. Short-term implied volatility in gold or the expected future movements increased from 17 to 20, not unexpected ahead of the US election, but put/call skew remained relatively flat suggesting no expected directional bias in future prices. 

Global uncertainties remain as gold demand trends continue! The official US Election Day came and went, but uncertainty over the results will likely continue for some time. As we recently noted in Gold and the US election, the fundamental support for gold investment demand is unlikely to change regardless of the Presidential victor. 

Our Q3 Gold Demand Trends highlighted a common 2020 theme. The global pandemic continues to hurt the economy, which in turn is negatively impacting consumer demand for jewellery and technology. On the flip side, investment demand, primarily through gold ETFs remains strong. 

Given the recent uptick in global Covid-19 cases, geopolitical and market uncertainty, and the expected long term, low-rate environment that improves gold’s opportunity cost3, we do not see this scenario changing in the coming months.