Gold-backed ETFs record ninth month of outflows

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Photo by Bloomberg

7th March 2024

By: Marleny Arnoldi

Deputy Editor Online


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Gold-backed exchange-traded flows (ETFs) recorded another outflow in February, extending their losing streak to nine months, with North America in the lead.

Total assets under management decreased by 1.8%, or $2.9-billion, in February to $206-billion, ending collective holdings at 3 126 t, which is 49 t less month-on-month.

This compares with a record of 3 915 t held in October 2020.

Outflows from global gold ETFs have amounted to $5.7-billion in the year-to-date, with North America accounting for $4.7-billion of the outflows and Europe for $1.4-billion of the outflows.

The World Gold Council (WGC) attributes the North American ETF divestment trend to a stronger dollar and sustained strength in US equities diverting investor attention, which dents demand for gold. From an ETF perspective, North America now holds the lowest holdings in four years.

The latest round of global outflows, following a similar ETF outflow trend between May 2022 and February 2023, had little negative impact on the gold price performance, which was supported by resilient consumer demand and high central bank purchases.

European outflows of nine months straight are owing to rebounding government bond yields, as investors adjusted their bets on a monetary policy pivot by the European Central Bank, weak price performances in local currencies and continued rallies in regional stocks, all of which drove down local investor interest in gold-backed ETFs.

Asia, on the other hand, recorded a twelfth consecutive month of inflows in February, attracting $200-million. China accounted for the bulk of Asian inflows in the month, as investor interest in gold persisted amid a weakening local currency and a stable gold price.

Over the past 12 months, inflows into Asian ETFs add up to $2-billion, which marks a 41% rise in total assets under management.

‘Other’ regions had outflows of $24-million.

Moreover, the WGC explains that trading activities across global gold markets contracted in February, averaging $148-billion a day, which is a 16% month-on-month decrease.

Trading volumes on the over-the-counter market declined to $96-billion a day, which is 7% lower compared with January, which WGC attributes to weaker wholesale demand in China – amid the Chinese New Year and fewer working days.

The average trading volume of exchange-traded derivatives decreased by 30% month-on-month to $49-billion a day, while global gold ETF market liquidity remained stable at $1.8-billion a day, which is unchanged from January

WGC adds that total net longs at the COMEX fell further to 448 t by the end

Of February, marking a decrease of 23 t month-on-month. The weak gold price performance in the dollar and record-setting equities around the world diverted investor attention away from gold.

Money manager net longs saw a mild decline of 12 t, arriving at 212 t as of February.

Nonetheless, net long positioning has been rebounding during the second half of the month, supported by a notable rebound in the gold price d

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online




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