Holdings in global gold-backed exchange-traded funds (ETFs) fell marginally, by 2.2 t, in May to 2 421 t, which is equivalent to $141-million in outflows, as consistent European fund growth was offset by outflows in North America and Asia.

The World Gold Council (WGC) on Thursday reported its statistics for last month, stating that global assets under management in US dollars rose by 1% to $101-billion as the price of gold rallied 1.7% during May.

In the year to date, global gold-backed ETFs have lost 0.5% in assets (19 t, or $535-million), mostly owing to heavy outflows in February, April and early May.

However, the council said increased uncertainty and market volatility had supported a flight to quality flows into gold-backed ETFs in recent weeks.

FUND BY FUND

European fund assets added 15.9 t, or $627-million, during May. Two-thirds of the inflows came from UK funds, where assets reached 505 t – near all-time highs once again.

The WGC said inflows in the UK were likely driven by uncertainty over Parliamentary leadership as PM Theresa May resigned, resulting in a weaker pound sterling, which was down 4% against the US dollar on the month.

Outflows in North American funds of 13.7 t, or $580-million, were mostly driven by the two largest funds in the world, iShares Gold Trust (with $523-million) and SPDR Gold Shares (with $134-million).

The WGC noted that this trend was particularly acute in the first half of the month but had reversed to some degree in the past few weeks.

“Despite the strength in the price of gold, momentum positioning weakened as net longs decreased in Comex futures and short interest increased in North American funds, likely impacting on flows in the products, while gold trading volumes in May increased to $115-billion a day, in line with the 2018 and 2019 averages.

“Low-cost gold-backed ETFs in the US added $90-million in assets, led by SPDR Gold MiniShares (with $53-million) and Graniteshares Gold Trust (with $48-million) after small outflows in April.”

The WGC further reported that low-cost assets had, once again, risen to all-time highs of 52 t, or $2.2-billion, growing 85% over the last year.

Assets in Asian gold-backed ETFs continued to decline sharply, losing 4.1 t, or $171-million.

The region has lost 10% of assets this quarter and 17% this year.

Stock markets across the globe finished sharply lower in May, which was their worst monthly return since the December 2018 selloff, which has continued into June.

This was largely driven by continued US/China trade negotiation breakdowns, with the most recent downturn related to the surprise announcement that the US plans to impose tariffs on Mexico in the coming weeks.

“The risk-off environment created an opportunity for gold to showcase its role as a safe-haven asset. While gold was relatively flat when there were small movements in the stock market over the course of the month, gold was higher by 90 basis points, on average, each of the days the US stock market was down more than 1%, which was four times,” said the WGC.

As noted in the WGC’s ‘Impact of Monetary Policy on Gold’ report, shifts in economic and monetary policy could pave the way for support in gold’s performance in the second half of the year.