Globally, gold-backed ETFs (gold ETFs) added 170 tonnes – net inflows of $9.3bn (+5.1%) – in April, boosting holdings to a new all-time high of 3,355 tonnes. Assets under management (AUM) also reached a new record high of $184 billion as gold in US dollars moved higher by 5.8%. Inflows have been strong and consistent in recent months, but not unprecedented.
Rolling twelve-month inflows of 879 tonnes just surpassed those of 2009 and 2016, while rolling six-month inflows have barely experienced two-thirds of the 457t of inflows in the comparable time periods of 2009 and 2016, says the April report brought out by the World Gold Council.
Uncertainty surrounding the economic and social impact of COVID-19, along with significant central bank intervention, continued to drive inflows into gold. Gold ETFs listed in all regions experienced inflows during the month, with inflows being particularly strong in North America, where flows have often been more correlated with gold’s price behaviour.
North American funds added 144 tonnes ($7.8 billion), while European funds added 20 tonnes ($1.1billion). Asian funds – primarily in China – also finished the month with relatively strong inflows, adding 2.9 tonnes ($206 million), and funds in other regions grew by 5.8%, adding 3.3 tonnes and $172 million.
The price strength of gold has, so far, mirrored that of the Global Financial Crisis. A vast majority of central banks, including the US Federal Reserve, continue to note their willingness to utilise well established – and new – ‘tools’ to support the economy. While this comes at a time when COVID-19 cases are diminishing and related actions – such as fast-tracked treatments and antibody tests – may help to create a path towards ‘normalisation’, the long-term effects of the pandemic on the economy and any future societal shifts are yet to be determined.
Just last week, the US published annually adjusted GDP losses of 4.8% in the first three months of 2020, the biggest quarterly decline since the fourth quarter of 2008. Europe, as a whole, was worse – the region shrank 14.4% on an annualised basis during the first quarter, the lowest quarterly number ever. It is this uncertainty, along with the unknown ability of central banks to support the markets, that could continue to drive investment demand for gold. Central banks will continue to remain net buyers of gold in 2020, albeit at a lower level.