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Gold-backed ETFs enjoy return to positive flows


Global gold-backed ETFs recorded net inflows of USD11.8 billion in March, as positive flows across each global region led to the highest level of monthly inflows since 2016, according to new data released today by World Gold Council.

Similarly, March investment activity drove Q1 inflows to the highest quarterly level since Q3 2020, the WGC says.
Now three months into 2022, the total inflows of USD16.6 billion have surpassed the 2021 outflows of USD9.1 billion, and current holdings leave total gold ETF holdings just 1.8 per cent shy of the all-time month-end high recorded in October 2020. 
Gold finished the month 1.7 per cent higher at USD1,942/oz and traded at USD2,069/oz on March 8th, just shy of its all-time high, as the Russian oil ban fuelled stagflation fears. While gold price retreated throughout the month, yield curve flattening and a possible inversion were ultimately the key market drivers, as many central banks’ policies became less accommodative, the WGC says. The Federal Reserve increased its policy rate by 25 basis points in March, with dot plots suggesting total hikes between 1-3 per cent this year, including potential 50-basis-point hikes. 

Regionally, North American funds: increased by USD6.3 billion (5.5 per cent AUM), driven primarily by inflows into US funds while European funds were up USD5.2 billion (5.3 per cent AUM), as UK funds represented 38 per cent of all global inflows.

The WGC writes that Asian funds: recorded USD166 million (2.2 per cent AUM) in inflows, despite outflows to begin 2022. Low-cost ETFs have continued their momentum, adding USD1.46 billion (13.5 per cent) YTD and gold daily trading averages jumped higher to USD170 billion per day, marking a steady rise from the 2021 average of USD130 billion.

Gold finished March 1.7 per cent higher and 7.6 per cent higher on the quarter, settling at USD1,942/oz to end the month.

Adam Perlaky, senior analyst at the WGC says: “Recent geopolitical events have highlighted how investors view gold as an effective and proven hedge. As evidenced by the highest level of monthly inflows since 2016, gold-backed ETFs have served as a safe haven for investors amid the current, volatile market conditions. While geopolitical events are not the main or even secondary reason for owning gold, historical analysis suggests gold has kept gains made in the months following an initial tail risk event, such as the war in Ukraine.
“Looking forward, inflationary pressures and stagflation fears are likely to remain high. Coupled with the flattening of the Treasury yield curves, conditions will likely support gold investment demand. While higher rates may create some headwinds, gold’s dual nature as a consumer good and an investment will likely drive its recent price gains.” 

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