Gold ETFs rally ends with 49 per cent growth in Q1 2019

After the better part of 2018 was marked by a veritable flight from gold among US investors, October saw a trend reversal that turned into a gold rally towards the end of the year, with all 2018 outflows from gold ETFs slightly overcompensated by net inflows. In the first quarter of 2019, the strong growth trend in physical gold ETFs continued nearly unabated.

According to the data of the World Gold Council's Gold Demands Trends Q1 2019 Report, gold-backed ETFs grew globally by as much as 49 per cent in the first quarter, despite outflows of 8 per cent in China. Although Gold ETFs, with 40.3 tonnes of inflows, represented only a limited part of the total 298.1 tonnes of gold investments in Q1 2019, they are commonly considered a medium- and long-term trend indicator. The trendsetters are mostly US investors, who are usually more willing to take risks than European investors and react more sensitively to price movements on the US capital market and, of course, in their domestic currency.

April slump: strong US-driven outflows

Against the six-month trend, April 2019 saw net outflows of 2.3 per cent in gold-backed ETFs worldwide, according to the World Gold Council. In the US and Asia, outflows amounted to an even higher 3.7 and 3.8 per cent, respectively. On a product level, the Chinese Guotai Gold ETF saw the strongest outflows at -47.8 per cent; the British Gold Bullion Securities Ltd the lowest at -0.9 per cent. Xetra-Gold was able to hold its ground with slight inflows of 0.2 per cent. It is hard to say how gold ETFs will perform in the second quarter of 2019, with the strong US stock market and the two-year high of the US dollar on the one hand and the escalating Iran nuclear crisis and US-Chinese trade war on the other, which will potentially lead to an increased demand for gold, at least in Asia.