Holdings in gold ETFs slightly up y-o-y

Physically-backed gold ETFs faced hard times in 2018, with only three periods of inflow in the first nine months of the year: January, April and May. In the US, the largest market for gold ETFs, there were only two months in which inflows offset the outflows. The strength of the US dollar and the US stock market boom caused a veritable flight from gold which resulted in overselling. A factor that added to this development might be the generally higher risk tolerance of investors in the US compared to a large part of European investors. Since October 2018, the US ETF market has fundamentally turned.

US investors rediscover gold ETFs

Not only did US demand for gold turn positive in October 2018 according to the World Gold Council – the inflows into physically-backed gold ETFs even exceeded those of all other regions: US investors were responsible for more than 75 per cent of all global inflows and outflows in October. The reason for this sudden change is the clouding of stock markets worldwide, especially in the US. November turned out to be just as positive for physically-backed gold ETFs – so positive, in fact, that one month before the end of the year has seen a wafer-thin annual increase of 1.1 per cent in US dollars in global holdings in gold ETFs. This was not what many people had expected, given the partially massive outflows over the course of the year.

Gold ETF inflows or outflows are regarded as indicators

Just like physical gold, physically-backed gold ETFs are not only an integral part of investment strategies and portfolio management, but also reflect both short- and long-term expectations regarding future market developments, especially of institutional investors – and not only those of the gold market. This once again confirms the unique role of gold as a safe haven in times of geopolitical imponderability.