Market Overview

Gold ETFs Shatter Previous Years Records — And We're Not Even Halfway Into 2020

Gold ETFs Shatter Previous Years Records — And We're Not Even Halfway Into 2020

Led by the SPDR Gold Shares (NYSE: GLD), the category's big kahuna, gold exchange-traded funds are on torrid asset-gathering paces this year.

What Happened

Not only are assets under management at gold ETFs, in aggregate, residing at all-time highs, but year-to-date inflows to these products are beating any previous year's record not even halfway through 2020.

“Continuing their growth streak, gold-backed ETFs (gold ETFs) added 154 tonnes (t) – net inflows of US$8.5bn (+4.3%) across all regions in May, boosting global holdings to a new all-time high of 3,510t,” according to the World Gold Council. “Year-to-date, inflows (623t, US$33.7bn) now exceed the highest level of annual inflows (591t) seen in 2009.”

Year to date, investors have added $12.95 billion to GLD, the largest bullion-backed ETF in the world. Only two other ETFs have seen larger inflows.

Why It's Important

Low interest rates in the U.S., debased currencies and loose monetary in other countries, global central bank buying of gold and investors' thirst for safe-haven assets against the backdrop of the coronavirus are providing a perfect storm for gold ETFs.

“Positive flows combined with a rising gold price also pushed assets under management (AUM) in gold ETFs to new record highs of US$195bn, even as stock and bond prices increased,” said the WGC. “Global gold ETFs had inflows in all but two trading days during April and May (41 of 43 days). The only other historical period with similarly consistent inflows occurred in May and June of 2016, when funds experienced inflows in all but four trading days.”

Other gold ETFs attracting capital at impressive rates include the iShares Gold Trust (NYSE: IAU), which added $4.43 billion in the year-to-date period.

What's Next

Data confirm gold ETFs are popular with investors around the world, but North America remains the driving force in this category.

“North American-listed gold ETFs led regional inflows during May. Flows in the region are historically more correlated with gold’s price behaviour,” said the WGC. “The region’s funds led inflows for a second straight month, adding 102t (US$5.6bn, 5.6% AUM). North American funds now hold 1,815t of gold, surpassing the previous highs of 1,736t they held in December 2012. European funds added 45t (US$2.4bn, 2.9%), led by UK-based funds, which accounted for 65% of the total in the region. Asian funds – primarily in China – grew, adding 4.4t (US$262mn, 4.7%), and funds in other regions grew 4.3%, adding 2.6t and US$136mn.”

Investors are also flocking to lower-cost gold ETFs as the SPDR Gold MiniShares Trust (NYSE: GLDM) and the GraniteShares Gold Trust (NYSE: BAR), two of the least expensive funds in the category, have added more than $1.6 billion combined.

Disclosure: The author owns shares of IAU.


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