Global gold-back exchange-traded funds (ETFs) and similar products recorded $3.9-billion of net inflows across all regions in September, increasing their collective gold holdings by 75.2 t to 2 808 t, the highest levels of all time, the World Gold Council (WGC) said on Tuesday.

Holdings surpassed late 2012 levels, at which time the gold price was near $1 700/oz, about 18% higher than current levels, the council said.

North American- and European-listed funds now make up 52% and 44% of the global holdings, respectively, with the remainder coming from funds listed in Asia and other regions.

This, the WGC pointed out, was vastly different to the gold-backed ETF landscape in 2012, when two-thirds of global holdings were concentrated in North America.

During last month, North American funds led September’s global flows, adding 62.1 t, or 83%, of net inflows.

Low-cost gold-backed ETFs continued to grow, the council said, noting that this accumulated to 2.9 t during the month and bringing their collective holdings to 61 t, worth $2.9-billion.

European-listed funds brought in 7.7 t, mainly in the UK, as investors positioned for the Brexit decision, the verdict on which is expected by October 31.

Funds in Asia, meanwhile, had another month of strong inflows at 3.9 t, the WGC said, explaining that this was mainly driven by Chinese funds.

However, the gold price rally paused as global rates increased, and the dollar strengthened, falling by 3% in dollar term in September after having increased by 20% during the previous four months.

Yet, according to the council, global demand for gold-backed ETFs remained strong, especially since gold remained near all-time highs in every major Group of 10 currency, except the dollar and Swiss franc.

Positive sentiment towards gold was also reflected in Comex net longs, which reached all-time highs equivalent to 1 134 t during the month.

This volatility skew in the options market was at an all-time high, measured against available data from 2007 onwards, the WGC noted.

The skew, it elaborated, was computed as the different in premia paid between puts and calls at equivalent strikes, which implies that market participants were willing to pay a significant premium for exposure to a higher gold price versus protection against a lower price.

In turn, this suggested a bullish sentiment, the council said.

Meanwhile, global trading volumes remained high across markets, finishing the month at $183-billion daily, but fell 10% from August levels. Volumes on the Shanghai Futures Exchange remained elevated, however, at $20-billion daily, which is above the 2019 year-to-date average of $9-billion and the 2018 full-year average of $3-billion.

During September, global monetary policy continued to influence the gold price performance as many central banks globally cut rates or expanded quantitative easing measures, the council added.

By the end of the month, US Federal Reserve fund futures indicated less than a 50% implied probability of a cut in October, and a 73% chance of a single cut by the end of the year.

This highlights the point that gold price performance is likely to be impacted by uncertainty around monetary policy direction, the council said, adding that there are, however, several potential positive catalysts for gold in October.

First, global uncertainty continues, considering that the US House of Representatives initiate a preliminary inquiry as to whether to proceed with a formal impeachment investigation of President Donald Trump. This move, the council explained, could negatively impact on risky assets and drive China to potentially delay trade solutions until the 2020 Presidential election.

Additionally, there is still uncertainty until the deadline for a Brexit decision or another deadline extension.

Secondly, despite the increases during September, interest rates globally remain low. The council estimates that more than 80% of sovereign debt is trading with negative real rates, which lowers the opportunity cost of investing in gold.

Lastly, the US stock market is trading near all-time highs and, historically, October is a month when some of the sharpest historical down-moves in stock performance are seen, the WGC pointed out.

However, on the flip side, continued dollar strength and a deceleration in gold consumer demand in India and China could create potential headwinds.

YEAR-TO-DATE

Global gold-backed ETFs added 368 t in the year-to-date, driven by strong inflows in the past four months.

European funds have grown consistently this year, seeing positive flows in all months except April and UK-based fund holdings, which continue to make all-time highs, reaching 21% of global gold-back ETF assets in September.

Strong inflows in North American-listed funds over the past five months have increased the regions’ contribution to this year’s growth, where, as of end September, North America has added 214 t compared to the 146 t from Europe.

Low-cost gold-backed ETFs in the US have seen positive flows for 15 of the past 16 months, and have increased their collective holdings by 51% so far this year, while Asian-listed funds have reversed strong early-year outflows of over 12% and now have grown 8% on the year.