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In the first half of 2020, global gold ETF net inflows were US$40 billion

2020-07-08


June highlights:

As of June, global gold ETFs have seen net inflows for 7 consecutive months, setting a historical record

In the first half of 2020, the total scale of global gold ETFs (in tons) increased by 25%

Gold is still one of the best performers among all mainstream assets, with a return of over 17% in the first half of the year


As of June, global gold ETFs have seen net inflows for 7 consecutive months, setting a historical record. The total amount of global gold ETFs increased by 104 tons (approximately US$5.6 billion, equivalent to 2.7% of the total asset management scale), which brought its total holdings to a record high of 3,621 tons.

Whether it is in tonnage (exceeding the total growth record of 646 tons set in 2009), or in the value of net inflows (exceeding the record of annual net inflows of US$23 billion set in 2016). In the first half of this year, the total global inflow reached 734 tons (about 39.5 billion U.S. dollars), far exceeding the previous annual inflow record.

From another perspective, the net inflow in the first half of the year was much higher than the multi-year highs of global central bank purchases of gold in 2018 and 2019, and it was equivalent to 45% of global gold mining in the first half of this year.


Looking back in June, the traffic in all regions of the world increased slightly

In June, net fund inflows in North America accounted for 80% of total global inflows, and total holdings in the region rose by 83 tons. In Europe, the net inflow of gold ETFs from Switzerland and Germany offset the net inflow of British funds, resulting in an increase of 18 tons of total holdings in the region.

The total holdings of gold ETFs in Asia increased slightly by 0.4 tons, with India's gold ETFs taking the lead. Gold ETF holdings in other regions also increased, rising by 3 tons.


Multiple factors continue to drive investment demand for gold ETFs

At the beginning of June, the global stock market performed strongly, which was mainly driven by the optimism brought by the gradual relaxation of blockade measures taken by countries around the world to contain the new crown epidemic.

However, with the increase in the number of new coronavirus infections in many places around the world and the possibility of a second wave of outbreaks, such optimism has gradually cooled.


Although the May US employment report data was better than expected, and the US economy also has potential signs of recovering from the impact of the new crown epidemic. But Fed Chairman Powell remained cautious, saying that the Fed "...will be committed to using various monetary policy tools to do everything we can to boost the economy, no matter how long it takes...".

Although further loose monetary policy measures are generally considered to be good for the stock market, and the Fed’s cautious stance has signaled a decline in its risk appetite, at the same time, many market participants have begun to change their expectations for economic recovery from the previous V-shape. Reverse adjustment to U-shaped recovery.

Concerns about the impact of the second outbreak of the new crown epidemic on the already deep-seated global economy has triggered a new round of risks and uncertainties.

At the same time, the continuous asset purchases of central banks have further reduced the opportunity cost of holding interest-free assets, such as gold.

These factors continue to push up the investment demand for gold, benefiting gold ETFs.


Gold prices rose to the highest level in the past 8 years

The dollar price of gold rose again in June, rising 2% to US$1,768.1 per ounce, the highest level since October 2012.

In June, the 30-day realized volatility of gold was between 14% and 15%, which was lower than the highest level in March and April (>30%). The implied volatility is around 20%, which remains stable, which may imply that investors expect more short-term gold price fluctuations.

Gold is still one of the best performers among all mainstream assets, with a return of over 17% in the first half of the year. The performance surpassed global stocks, commodity indexes and one of the worst performing assets this year, crude oil.

In June, the global gold trading volume dropped to 156.9 billion US dollars per day, a 6% drop from the previous month. At the same time, the average daily trading volume in June was lower than the record of USD 233 billion/day set in March this year, but it was still higher than the average daily trading volume of USD 145.7 billion in 2019.

Comex gold futures net long position fell to 701 tons, which is the lowest level since June last year, but at the end of the month, the figure rose to 857 tons, compared with the historical record of 1,209 tons (approximately US$63 billion) set in February. 30% lower.

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Global environment is conducive to gold investment, opportunities and risks coexist

Concerns that a second outbreak of the epidemic will threaten the still fragile economic recovery are growing. In some regions, especially the United States, the rising infection rate suggests that it will take some time for countries to resume work in an all-round way with confidence.

In a recent media briefing, WHO Director-General Tedros Adhanom Ghebreyesus warned: "Although some countries have made some progress in controlling the epidemic, in fact the global epidemic is still accelerating."[5] This means that investors will still face high risks and uncertainties.

The global economic and geopolitical environment is still conducive to gold investment demand, while many other driving factors are still valid. Global central banks still maintain low or even negative interest rates, which keeps the opportunity cost of holding gold at a low level. At the same time, the situation in some countries remains turbulent.


Global funds are all net inflows, and North America accounts for a relatively high proportion

In June, there was a net inflow of funds in all regions of the world, of which inflows from North America accounted for the vast majority of the total global inflows:

Gold ETF flow by region

North America: a net inflow of 83 tons (US$4.6 billion, 4.3%)

European region: holdings increased by 18 tons ($746 million, 0.8%)

Asia: Open interest increased slightly by 0.4 tons (37 million US dollars, 0.6%)

Other regions: inflow of 3 tons (US$150 million, 4.4%)


Specific fund flow changes

In June, the inflow of SPDR® Gold Shares and iShares Gold Trust accounted for 67% of the total global inflow.

North America: The inflow of SPDR® Gold Shares topped the world, with holdings increased by 56 tons ($3.2 billion, 5.1%), and iShares Gold Trust holdings increased by 14 tons ($795 million, 3.2%). SPDR® Gold MiniShares led the inflow of low-cost funds, holding positions increased by 5 tons (US$295 million, 13.6%), followed by Aberdeen Standard Physical Gold Shares, holding positions increased by 2 tons (US$100 million, 4.8%);

Europe: France's Amundi Physical Gold ETC net inflow of 10 tons (581 million US dollars, 21.1%) is the highest in the region, Germany's Xetra-Gold and UK's Invesco Physical Gold ETC holdings increased by 7 tons (286 million US dollars, 2.4%). And 4 tons (US$217 million, 1.9%);

Asia: China Huaan Gold ETF holdings dropped by 2 tons (-1111 million US dollars, 6.9%), but this was offset by inflows from other Asian funds;

Others: Saudi Arabia’s Albilad Gold ETF was listed in June, and its total position as of the end of the month was 1 ton (41 million U.S. dollars). In addition, our database also records that it was listed in June, with a total asset of approximately 0.5 Tons of China’s China Gold ETF.


Historical high has reached, long-term trend outlook

So far this year, the total inflow of global gold ETFs has exceeded the annual record of 646 tons of net inflows set in 2009:

In the first half of 2020, the total scale of global gold ETFs (in tons) increased by 25%;

The total global gold ETF holdings in tonnage and value all set record highs;

In terms of tons, the scale of funds in North America and Europe accounted for 52% and 43% of the world, respectively. The market shares of these two regions began to diverge since March.



Source: World Gold Council

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