The World Gold Council’s latest report on gold ETFs reveals that gold has experienced significant price declines of 6 per cent during the first half of 2021. However, fund flows remain stabilised due to the North American and Asian fund flows offsetting European outflows. Overall, the drop in global gold ETF AUM is 14 per cent lower than August 2020 highs.
Global gold ETFs experienced plateauing flows throughout June with slight inflows of 2.9 tonnes. In particular, the low cost of gold ETFs enabled USD222 million to be contributed towards the combined flows of North America and Europe. In reverse, Asian-listed funds observed positive flows in India and China, while fund flows in ‘Other’ regions fell by 0.8 per cent. Overall, the price of gold in June 2021 was 7.2 per cent lower at USD1763/oz. In addition, gold daily trading averages fell to USD163 billion per day compared to USD176bn in May.
Gold prices managed to rebound throughout the second quarter which were then followed by gold ETFs, mostly led by North American and European funds. Germany represented half of all European inflows at USD1.5 billion. Over the pond in North America, SPDR Gold Shares and SPDR Gold MiniShares led inflows, contributing USD615 million and USD225 million respectively. Asian funds experienced small outflows of USD92 million in the June quarter which failed to offset the heavy losses experienced in May.
Looking ahead: “Central banks will likely maintain accommodative monetary policy for some time, keeping opportunity costs of holding gold low”, according to the World Gold Council. Additionally, there may also be a long-term hold over higher inflation rates in developed markets which will reinforce the need for assets like gold. Forecasts must also consider the spread of new Covid-19 variants that may provoke instability in vital markets such as India.
In conclusion, the council says that central bank demand has been resilient in 2021 and indicates that gold is consistently viewed as a strong hedge in foreign reserves.