October sees gold ETF uptick, despite six-month decline

4th November 2022 By: Donna Slater - Features Deputy Editor and Chief Photographer

The World Gold Council (WGC) reports that October data on gold exchange-traded funds (ETFs) points to market sentiment remaining “cloudy” as the commodity fell 12% from September, declining by 59 t and averaging $114-billlion in the month.

October was also the sixth consecutive month gold ETFs declined but this was less pronounced than the 95 t decline of September, as well as being the best performing month for the year to date.

Nonetheless, the WGC states the 0.4% fall in tonnage holdings is milder than the 9% drop in the gold price.

Gold ETFs, the WGC says, experienced a strong start to the year as intensifying geopolitical risks and rising inflationary concerns drove net inflows of 316 t between January and April.

However, a strong dollar, alongside an increasingly aggressive US Federal Reserve, resulted in net outflows of 368 t from May to October.

At the end of October, total assets under management (AUM) stood at nearly 3 490 t ($184-billion) – the lowest since April 2020 in tonnage terms.

Month-on-month declines were experienced across the board with exchange-traded derivatives registering the largest decline of 16% from September.

Quoting Commitment of Trader’s reports, the WGC says net managed money positioning has been swinging between net longs and net shorts during October as investors weighed intensifying inflation expectations against the US Federal Reserve’s aggressive path.

Towards the end of October, the WGC points out that the net managed money position totalled outflows of 103 t, representing a slight rebound from September’s outflow 128 t.

In addition, all regions were affected by outflows, with North American funds declining by 2% month-on-month with the removal of 40 t ($2-billion), European holdings declining by 1% with the removal of 14 t ($750-million) and Asian funds losing 4% with the removal of 5 t ($256-million).

However, the WGC notes that other regions were virtually unchanged, with 20 kg outflowing.

In terms of individual flows in October, the WGC reports that iShares Gold Trust and SPDR Gold Trust in the US, as well as Invesco Physical Gold ETC and iShares Physical Gold ETC in the UK, drove global outflows during October.

In North America, iShares Gold Trust led outflows with holdings declining by 4% with the removal 21 t ($1-billion); followed by SPDR Gold Trust which declined by 2%, losing 19 t ($988-million).

In Europe, UK funds saw the largest outflows as Invesco Physical Gold ETC declined by 2%, losing 4 t ($235-million) and iShares Physical Gold ETC saw its AUM declining by 1%, losing 3 t ($183-million).

Meanwhile, ZKB Gold ETF in Switzerland capped the region’s largest inflow of 1 t – a decline of 1% ($81-million).

In Asia, outflows were entirely contributed by Chinese ETFs, with Huaan Yifu registering a 14% drop of 4 t ($198-million), while E Fund declined by 11%, losing 1 t ($63-million).

As for long-term trends, the WGC reports that in October, year-to-date changes in gold ETF holdings turned negative for the first time this year, being 2% lower year-on-year in tonnage terms.

Flows from larger, liquid funds continued to move with the price of gold, while low-cost funds remained positive and European funds led global year-to-date inflows, the WGC reports.