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Gold-backed ETF AUM up 15 per cent in June

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Holdings in global gold-backed ETFs and similar products rose sharply in June by 127 tonnes (t) to 2,548t – equivalent to USD5.5 billion in inflows – as geopolitical uncertainty increased and central banks signalled a shift to a more accommodative policy over the coming months. 

That’s according to the to the World Gold Council’s 2019 June Fund Flows report which says that this drove rates and the US dollar lower and shifted the momentum in gold as its price moved to a six-year high. 

Global assets under management (AUM) in US dollars rose 15 per cent to USD115 billion, the largest monthly increase since 2012, as all regions experienced inflows. More than half the AUM growth came from the 9 per cent gold price rally in US dollars. Gold is one of the strongest performing asset classes in 2019, and reached all-time highs in a handful of currencies, most notably the Australian dollar, particularly relevant as Australia ranks second globally amongst countries in gold mining production. 

North American funds added 65t (USD2.9 billion, 5 per cent of AUM), driven in part by momentum investors who utilised the most liquid funds to gain investment exposure. Additionally, low-cost gold-backed ETF assets rose to all-time highs of 53t (USD2.4 billion), representing 85 per cent growth over the past year. We believe the strong asset growth in not only larger, more liquid funds, but also low-cost funds, highlights increased holdings by both tactical and strategic investors. 

European funds brought in 59t (USD2.5 billion, 4.8 per cent), as UK-based funds represented three out of the top five funds globally in terms of inflows. The continued uncertainty surrounding UK leadership and Brexit continued to drive gold investment demand, with UK-based holdings at all-time highs. 

Gold prices broke out above the five-year resistance level of USD1,365, as momentum and sentiment shifted. After spending much of last year at historically low levels, COMEX net longs increased to 868t at the end of the June, the highest level in nearly three years†. Gold trading volumes increased to USD165 billion per day in June, 45 per cent higher than the 2018 average, driven by volume in the over-the- counter (OTC) markets, which rose 50 per cent m-o-m. Gold options put/call skew continued to move to extreme levels, as investors paid a much higher premium to buy calls versus puts. 

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