Gold-backed ETFs see first net outflows in a year in November 2020

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Gold-backed Exchange Traded Funds recorded their first net outflows in a year and second-largest monthly outflows ever in November, the World Gold Council said in a report.

Gold ETF holdings decreased by 107 tonnes during the month equivalent to $6.8 billion or 2.9 per cent of assets under management. That came on the back of gold price’s worst monthly move in four years as prices dipped 6.3 per cent to $1,763 per troy ounce.

Despite the poor showing during the month, net inflows during the year at 916 tons remains well above the highest yearly amount on record. Still, till October, the net inflows amounted to 1,022 tonnes.

Total global holdings in gold are now at 3,793 tonnes or $215 billion.

The risk on sentiment in global financial markets from the promise of covid vaccines drove gold ETF outflows across all regions with North American and European Funds each losing nearly 3 per cent of assets and Asian funds had outflows of 0.5 per cent.

Two key market risks – the US election and the pandemic – appear to have subsided and therefore driven stock markets to all time-highs in some countries including India.

The World Gold Council said that though third quarter gold demand trends had suggested that a weaker global economy would impact consumer demand for jewelry, “Our recent data suggests that the improving Chinese economy and the festival season in India may have spurred consumer demand.”

Central banks resumed net gold buying in October, having been quarterly net sellers in Q3 for the first time in 10 years. The low rate environment that improves gold’s opportunity cost is likely to remain, especially as many countries start to inject additional stimuli into their economies, the World Gold Council said.

Biman Mukherji is a columnist and consulting editor at Indoasiancommodities.com. He has worked for international news organisations such as Reuters, The Wall Street Journal as well as for newspapers like The Times of India. He can be reached at biman.mukherji@indoasiancommodities.in

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