Industry Updates

Gold ETFs suffer outflows as equity market rallies

George Geddes


Global gold-backed ETFs suffered negative flows in November following significant inflows for the previous five months, according to a recent monthly report by the World Gold Council.

Across North America, Asia and Europe, gold ETFs saw $1.3bn outflows, decreasing the collective holdings in the precious metal by 30.1 tonnes.

The drivers for the negative flows in November include a stronger dollar, a Brexit extension into 2020 and strong equity markets in September and October.

Total assets under management have grown 35% year-to-date in tandem with investors uncertainty amid Brexit and ongoing trade wars in 2019.

As a result of the outflows and falling demand for the yellow metal, its value fell below $1,500/oz to $1,450/oz. Despite the dip in value, gold offered a YTD return of 14% by November’s end.

Gold ETF assets continue to grow despite price plateau

Regionally, European-listed funds saw outflows of $538m in the wake of the Brexit deadline being extended to January and a general election to carry out on 12 December.

North American funds suffered outflows of $731m, a 1.1% fall in AUM whereas Asian funds lost $119m, equating to a 3.1% loss in assets.

The World Gold Council forecasts the gold price to be further impacted by the uncertainty surrounding 2020 Fed expectations and an increased bullish market sentiment.

The VIX future positioning is at an all-time short level suggesting volatility is low however, previous scenarios have preceded with sharp stock market sell-offs and subsequent rallies in the price of gold. This suggests there is a potential for the price to climb to $1,550/oz which WisdomTree expects by Q1 2020.

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