Gold backed Exchange traded funds recorded their tenth straight month of net inflows during September, a stretch matched only by periods seen in 2008 and 2016, according to the World Gold Council..
This has taken the gold assets under management to a record high of 3,880 tons, which is equal to a value of $235 billion. Asian inflows have been the strongest this year recording a rise of 5.9%, North American funds were up 1.8% and , European funds inflows rose 2%.
Asian funds added 6.8t (US$432 mln, 5.9% AUM) as two new funds launched in China for a second straight month, bringing the total number of new funds in the region to seven this year. Safe-haven demand and strong y-t-d returns in the domestic gold price fostered Indian fund inflows during the month.
Gold ETF assets globally grew by 7% during the third quarter ended September, which is equivalent to $16 billion and 7% higher than the corresponding period last year.
Gold was one of several major assets, including stocks and broad-based commodities, that started the quarter strongly, reversed course in September, but closed the quarter higher.
The precious metal rallied sharply between April and July, to reach an all-time high in early August.
However, prices have corrected a bit to fall below $2,000/troy ounce as traders saw opportunity to book profits ahead of the end of the September quarter. Comex futures have seen reduced net long positioning since February 2020 all-time highs, but remain above the year’s average currently.
Rates to remain zero
Despite the weaker prices, positioning and volumes, investment demand via gold ETFs increased, suggesting continued long-term strategic positioning.
Last month, the US Federal Reserve implied that the rates could remain near zero for many years, and that this monetary policy philosophy could trickle into other regions, which is a positive for gold.
Financial markets are facing a period of uncertainty in the last quarter as analysts believe there is a good chance the US Presidential election will be contested and unresolved for some time after election day.
Moreover, there is uncertainty around a US stimulus bill and the Supreme Court Justice nomination. A no-trade deal Brexit scenario is possible, while COVID-19 cases are on the rise with the US President Trump among those infected.
Key gold consumer China could see an uptick in gold consumption due to an economic recovery, while India, the world’s second largest gold-consuming nation, has seen healthy monsoon rainfall for a second straight year that could mitigate the impact of covid on gold consumer demand.