Gold-backed ETFs experienced $1.3bn net outflows globally during November, reducing their collective physical gold holdings by 30.1 tonnes(t), after reaching record highs in October, according to data from the World Gold Council.
November marked the end of five consecutive months of inflows for gold-backed ETFs globally.
The outflows marked the end of five consecutive months of net inflows.
North American funds topped regional outflows, losing 17.3t ($731 million, 1.1% AUM) as the US dollar strengthened and stock markets reached all-time highs on the strongest monthly performance since June.
The SPDR Gold Shares (GLD US) led global outflows with, losing 19.9t ($925m, 2.1% AUM), in contrast to the iShares Gold Trust (IAU US) and SPDR Gold Mini Shares (GLDM US) which recorded modest inflows of 1.6t ($78m, 0.5% AUM) and 0.9t ($45m, 4.0% AUM), respectively.
In Europe, outflows of 13.6t ($538m, 0.9% AUM) were driven primarily by UK-based gold ETFs which lost 18.8t ($871m, 3.2% AUM) as the Brexit deadline extension prompted a reversal in the protective inflows of October. The WisdomTree Physical Gold (PHAU LN) and the iShares Physical Gold (SGLN LN) lost 13.3t ($528m, 7.0% AUM) and 8.0t ($317m, 8.0% AUM) respectively.
Gold-backed ETFs based in Asia saw 2.1t ($119m, 3.1% AUM) of redemptions, primarily as a result of outflows from Chinese funds such as the Huaan Yifu Gold ETF (518880 CH) which lost $75m (6% AUM) of its assets.
Gold ETFs in other regions bucked the trend, growing their collective assets by 2.9t ($138m, 7.6% AUM). In particular, South African-listed 1nvest Gold (ETFGLD SJ) recorded a sharp increase in holdings, adding 2t and growing its AUM by nearly 800%.
Gold price headwinds
The price of gold decreased by 3.4% during November to end the month at $1,463/oz. According to the World Gold Council, the risk-on environment, coupled with higher rates and easing geopolitical tensions, acted as headwinds for the gold price during the month.
Risky assets continued to “melt-up” in November as perceived market impacting events like the US/China trade deal and Brexit have been pushed out into 2020.
The lack of market risk concerns is highlighted by VIX future positioning which is at all-time short levels – a sign of extreme bullish market sentiment. The World Gold Council notes, however, that significant short positioning in VIX futures has at times preceded sharp stock market sell-offs and subsequent rallies in the price of gold.
Expectations for future US Federal Reserve interest rate cuts continued to fall in November, which also weighed on gold price sentiment. Market probabilities at the end of the month indicated just one rate cut next year which is not expected until at least the second quarter. The World Gold Council believes that gold price performance is likely to continue to be impacted by uncertainty around monetary policy direction.
Despite the fall in the gold price during November, the yellow metal’s total return year-to-date is 14% and it remains near all-time highs in every major G10 currency apart from the US dollar and Swiss franc.
The World Gold Council further notes that with over 70% of sovereign debt trading with negative real rates, the opportunity cost of investing in gold remains historically low.
Year-to date trends
Gold ETFs have added 385t ($18.6bn, 13.9% AUM) globally year-to-date, driven by strong inflows in the five months prior to November.
North American-listed gold ETFs have added 206t, or 54% of global inflows, compared to 171t (44%) in Europe. UK- and German-based funds have grown 15% and 12% respectively this year, a by-product of Brexit concerns and negative yields in Germany.
Low-cost gold ETFs – those with expense ratios of 0.20% or less – have seen positive flows for 17 of the past 18 months and have increased their collective holdings by 58% so far this year.