Gold demand dominated by US-listed funds again

News Arnulf Hinkel, Financial journalist – 16.04.2018

From 2004 to 2012, there had been more inflows into gold-based funds – ETFs and ETCs – in the US than in any other region of the world, with 2011 being the only exception, when inflows into European gold funds were almost 1.5 times higher than in US-listed counterparts. After North American demand had already picked up during the gold rally in the third quarter of 2017, it stood for almost all investor-driven gold demand in March 2018, according to the World Gold Council.

Over 95% of gold-based ETF demand in March by US investors

In March 2018, North American ETFs alone accounted for 21.5 tonnes of net inflows into gold funds, given a total of 22.5 tonnes. Other than that, there were further inflows only in Asia with 3.1 tonnes. At the same time, gold funds in Europe and the rest of the world primarily witnessed outflows totaling 2 tonnes. Over the entire first quarter of 2018, gold-backed funds added 47.3 tonnes of gold, with North American ETFs accounting for the lion's share of 85%. The fear of a trade war with China is certainly one of the reasons gold-based ETFs haven been rediscovered as an asset class, particularly in the US, after a worldwide decline of 63% year on year in 2017.

One of the most successful asset classes to date in 2018

It is not only geopolitical uncertainty and risks that continue boosting demand for gold, and therefore the gold price. It is also the current weakness on the stock markets – especially the temporary end of the US bull market – that increases the attractiveness of gold as an investment opportunity again despite further moderate interest rate hikes by the Fed. Also, during the first quarter of 2018, the relative US dollar weakness has contributed significantly to the gold price being quite volatile on the one hand, but performing better than most other asset classes on the other hand, having increased 2.5 per cent since early 2018.

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