Summary of World Gold Council global gold ETF report

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By Peter Kennedy

Despite a near-record high bullion price, global gold-backed exchange-traded funds (ETFs) saw further outflows in November, 2023. However, the pace of redemptions slowed sharply from the previous month supported by net inflows into North American funds, according to a World Gold Council (WGC) report.

Global physically-backed gold ETFs saw a small net outflow of US$920 million in November, 2023, significantly narrower than the previous month, while physical holdings dropped to 3,236 tonnes, a decrease of 9.4 tonnes from October, 2023.

However, the value assets under management (AUMs) rose 2.0% month on month to US$212 billion as gold prices rallied back through the US$2,000 an ounce marker.

The price of the yellow metal continued to shine at the start of December, 2023 amid hopes of U.S. Federal Reserve rate cuts in the spring, and as hostilities resumed between Israel and Hamas. On November 4, 2023, gold hit fresh record highs of around US$2,148 an ounce.

During November, the US Federal Reserve kept rates unchanged for the second consecutive meeting, fuelling investor hopes for the tightening cycle ending. Such anticipation was intensified by decelerations in inflation and the cooling job market, weighing further on US Treasury yields and the dollar.

The WGC noted that “geopolitical risk and investor positioning helped push gold higher in November, a move that contributed to the change in trend in the U.S.

North American funds enjoyed net inflows of US$658.9 million, or 10.4 tonnes in November. This marked a reversal from five straight months of redemptions and drove total holdings and AUMs to 1,631 tonnes and US$106.8 billion respectively.

In Canada, AUMs stood at US$4.2 billion or 64.7 tonnes, marking a decrease of 0.6%

However, European funds saw withdrawals for the sixth successive month, according to the WGC. Redemptions amounted to US$1.6 billion or 20 tonnes, pushing AUMs to US$92.4 billion and physical holdings to 1,411 tonnes.

The WGC said “opportunity costs continued to weigh on European investors’ appetite for gold ETFs” as yields remained around 10-year highs. It said rising local currencies weighed on investors’ appetite for the precious metal.

However, on the bright side, FX-hedged products – mainly from Switzerland – brought inflows, partially offsetting November’s losses. Funds listed in German saw the region’s largest outflows in the month.

In Asia, net inflows of 0.6 tonnes pushed total holdings to around 135 tonnes. Asia remains the only region experiencing year to date inflows, thanks to China, Japan and India. Meanwhile, AUMs increased by 47 million pounds sterling to 9.3 billion pounds.

November’s net redemptions mean that global ETFs endured outflows of 235 tonnes in the first 11 months of 2023. Total holdings of 3,236 tonnes at month’s end was down 17% from the all-time high of 3,916 tonnes recorded in October, 2020.

AUMs, meanwhile, dropped by $13.7 billion between January and November due to heavy outflows in Europe. The WGC noted that withdrawals of US$9.4 billion during the first 11 months of 2023 represented “the region’s second worst year-to-date performance in history.’’

In November, low-cost gold ETFs registered their sixth consecutive monthly outflow, collectively shedding US$1.0 billion or 15 tonnes.

The WGC said gold market trading volumes averaged US$174 billion per day, marking an increase of 3.0% month over month. While trading activity of gold ETFs dropped significantly (-26%), the OTC market was barely changed, and volumes of other exchange-traded products rose by 10% -contributed mainly by COMEX.

The WGC defines gold ETFs as regulated securities that hold gold in physical form. These include open-ended funds traded on regulated exchanges and other regulated products such as closed-end funds and mutual funds. It tracks gold ETF assets in two ways: the quantity of gold they hold, generally measured in tonnes, and the equivalent value of those holdings in US dollars (AUM).

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