Regional overview
North American and European gold ETFs both contributed to October’s outflows, led by larger funds in each region. North American funds had outflows of 14.7t (-US$817mn) mostly due to losses from large US funds that were likely impacted by options market activity around expiry in mid-October. Once again funds in the UK, in addition to France, led outflows within Europe, which lost a combined 12t (‑US$703mn). The US Federal Reserve began tapering bond purchases this month, though primarily short-dated Treasuries were impacted ahead of the announcement with limited influence on gold. Meanwhile, outflows from Europe came on the heels of heightened expectations of interest rate hikes before the end of 2022 in the face of decades-high inflation, despite the European Central Bank’s insistence otherwise. In contrast to prior months, low-cost ETFs4 globally had net outflows, losing US$133mn (-2.4t) as some US low-cost funds followed a similar trend to other funds in the region.
Conversely, Asian-listed funds were positive, adding inflows of 1.3t (US$74mn), led by China where holdings rose to record highs stemming from weaker economic data and middling local equity market performance. Other regions also modestly contributed to total assets with inflows of 0.2t (US$11mn).5
Price performance and trading volumes
Gold finished the month up 1.5%, settling near US$1,770/oz.6 Our monthly return attribution model suggests that gold’s recovery in October was driven by a rise in inflation expectations indicated by breakeven rates,7 outweighing the concurrent increase in nominal interest rate yields. This led to a decline in US real yields, which briefly hit their lowest levels since early August, while the dollar depreciated accordingly, particularly against energy-led commodity currencies. US inflation expectations rose to their highest point in eight years as both Brent and WTI oil prices surged above US$80/barrel for the first time since 2014 amid global energy shortages and heightened winter demand in Europe and North America. Gold remains more than 6% lower on the year even after having its best month since July given headwinds in Q1 and Q3. Gold daily trading averages in October increased slightly to US$151bn from US$146bn in September, but remain lower than the year-to-date average of US$159bn. Increases in both OTC and COMEX volumes were contributors, while net COMEX long futures positioning also rallied following stability in the gold price, increasing steadily throughout the month to above 700t (US$40n) for the first time since August.8 This figure sits well above the historical weekly average level of around 500t (US$28bn).9 For more details see Gold Market Commentary, October 2021.
Regional flows10
Outflows from North American and European funds in October significantly outweighed inflows into Asian funds
- North American funds had outflows of 14.7t (-US$817mn, -0.8%)
- Holdings in European funds had outflows of 12.3t (US$703mn, -0.8%)
- Funds listed in Asia had net inflows of 1.3t (US$74mn, 1.0%)
- Other regions had inflows of 0.2t (US$11mn, 0.3%).
Individual flows
SPDR® Gold Shares and Gold MiniShares in the US and WisdomTree Physical Gold in the UK drove global outflows in October, partially offset by inflows into Asian funds and iShares Gold Trust Micro in the US
- In North America, SPDR® Gold Shares lost 7.9t (-US$428mn, -0.8%) while low-cost SPDR® Gold MiniShares Trust had outflows of 4.1t (-US$234mn, -5.3%). iShares Gold Trust Micro partially mitigated this with inflows of 3.1t (US$179mn, 29.5%)
- In Europe, WisdomTree Physical Gold had outflows of 4.0t (-US$227mn, -3.8%) and iShares Physical Gold lost 3.7t (-US$214mn, -1.7%). On the other hand, Xtrackers IE Physical Gold continued growing with inflows of 2.0t (US$115mn, 5.7%)
- In Asia, Chinese ETFs Bosera Gold Exchange had inflows of 0.8t (US$47mn, 3.5%) while E Fund Gold added 0.6t (US$33mn, 4.2%).
Long-term trends
Gold ETFs have experienced outflows in six of the first ten months of the year as ETF investors have generally followed gold price trends
- Year-to-date, gold ETFs have seen global outflows of US$9.7bn (-181t) as large North American and some European funds have lost assets in line with oscillating gold prices, while low-cost and Asian funds have remained mostly positive
- Outside of slightly negative Q2 flows, Asian gold ETFs have consistently stood out as the often lone growth driver among global funds, having added nearly US$1.3bn (18%) y-t-d as concerns mount around regional economic growth
- Despite a weaker October, low-cost ETFs continue to post inflows regardless of price conditions, growing by almost 41% y-t-d (57.7t), and constitute close to 6% of the total global gold ETF market.