Global gold ETF holding surpass 1,000 tonnes for the year in September
September was not a great month for gold prices as the market saw its sharpest decline in four years; however, investment demand last month continued to grow at breakneck speed, according to the latest report from the World Gold Council (WGC).
Thursday, the WGC said that holdings in global gold-backed exchange traded products grew by 68.1 tonnes last month.
“Gold ’s 3.6% September pullback was likely tactical in nature. Gold rallied sharply (22%) between April and July, reaching an all-time high in early August. When prices move this quickly there is often a subsequent pause or pullback in the price related to profit-taking or positioning,” the analysts in the report said.
For the third quarter, the WGC said that holding grew 7%.
“Gold was one of several major assets, including stocks and broad-based commodities, that started the quarter strongly, reversed course in September, but closed the quarter higher. This was mirrored by a stronger US dollar that finished the quarter nearly 4% lower,” the report said.
The latest increase in inflows has pushed global holding for the year above 1,000 tonnes, a new record high. The WGC said that the value of assets under management is also at a record high of $235 billion for the year.
Analysts at the WGC said that the fact that investors continue to add gold even in a declining price environment is an indication of growing interest in long-term strategic positioning.
“Last month, we noted that the US Federal Reserve would no longer pre-emptively increase rates to cool higher inflation, implying that rates could remain near zero for many years, and that this monetary policy philosophy could trickle into other regions, assuring negative global real rates for the foreseeable future,” the analysts said.
Looking ahead, the analysts noted that there is enough financial market uncertainty and turbulence to continue to support investor demand in gold.
“Market analysts believe there is a good chance the US Presidential election will be contested and unresolved for some time after election day,” the analysts said. “Moreover, contentious dynamics around the stimulus bill and the Supreme Court Justice nomination are already whipsawing markets.”
Looking at a regional breakdown in investment demand, the WGC said that North American funds led the way with funds adding 34.6 tonnes to their holdings. Meanwhile, after seeing outflows in August, European funds recorded net inflows of 26 tonnes last month.
However, it was growth in the Asian market that particularly stood out for WGC analysts. The report noted that investment demand in Asia grew by nearly 7 tonnes. China is not traditionally known for its strong investment demand as consumers prefer to hold physical metal.
“Two new funds launched in China for a second straight month, bringing the total number of new funds in the region to seven this year,” the analysts said.
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