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Gold-backed ETFs see modest outflow in May

Global holdings of gold-backed exchange-traded funds (ETFs) fell by 2.2 tonnes in May to 2,421t, the equivalent of US$141 million in outflows, as steady European fund growth was offset by outflows in North America and Asia.
Gold-backed ETFs see modest outflow in May Gold-backed ETFs see modest outflow in May Gold-backed ETFs see modest outflow in May Gold-backed ETFs see modest outflow in May Gold-backed ETFs see modest outflow in May

Global holdings of gold-backed ETFs fell by $141 billion in May

Staff Reporter

The World Gold Council (WGC) said Thursday global assets under management were up 1% for the month to $101 billion, mainly owing to a 1.7% gain in the gold price.

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

But increased uncertainty and market volatility have in recent weeks driven flight-to-quality flows into gold-backed ETFs.

European fund assets added 15.9t, or $627 million, with two-thirds of the inflows originating from UK funds, where holdings reached 505t - once again near all-time highs.

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

Outflows in North American funds totalled 13.7t or $580 million, 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 said this trend was particularly acute in the first half of the month but had reversed to some degree in the past few weeks.

According to the council, despite the price strength, momentum positioning weakened as net long positions decreased in Comex futures and short interest increased in North American funds, likely impacting on flows in the products.

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 said.

The WGC also noted low-cost assets had, once again, risen to all-time highs of 52t, or $2.2 billion, growing 85% over the past 12 months.

Assets in Asian gold-backed ETFs continued its sharp decline, losing 4.1t, or $171 million. The region has lost 10% of holdings this quarter and 17% this year.

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

This was mainly 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.

The WGC recently said in its ‘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.