By Mike Maharrey
ETF gold holdings globally increased for the sixth straight month in October. Big flows of gold into North American and Asian ETFs offset outflows from European-based funds.
Collective ETF gold holdings rose by 43 tons. Gold-backed funds now hold 3,244 tons of metal.
Global assets under management (AUM) by gold-backed ETFs rose by 5 percent to a month-end record of $286 billion due to the addition of metal coupled with the skyrocketing gold price.
Year-to-date, global ETF gold holdings have increased by 18 tons. It was the first positive reading in 2024, with the recent influx of gold finally overtaking outflows through the early months of this year.
Gold-backed ETF AUM has surged by 33 percent in 2024.
North American funds reported a 30.5-ton increase in gold holdings despite rising Treasury yields, which typically create headwinds for gold. In dollar terms, North American ETFs charted an increase of $2.7 billion. World Gold Council analysts speculate that election uncertainty, along with the ongoing military conflicts in Ukraine and the Middle East, boosted safe-haven demand. The WGC also cited "FOMO" (fear of missing out) as a contributing factor to ETF gold demand as prices surged.
Asian funds added 23.4 tons of gold to their stocks in October, boosting holdings by 12.6 percent. This level of gold inflow was atypically high. China dominated inflows thanks to a record-shattering local gold price and increased equity volatility. The Chinese government recently announced an economic stimulus plan that could also boost gold demand. Gold also flowed into Indian ETFs last month.
European funds reported gold outflows of 11.1 tons. The decline in gold holdings was seen across the region, whereas they were concentrated in the UK in September. Unlike in the US, rising bond yields created headwinds for gold in the eurozone.
Funds in other regions, including Africa and Australia, reported a 0.6-ton increase in gold holdings. Asian and South African funds led the way. The weakening Aussie dollar helped spur gold investment.
Global gold trading volumes averaged $268 billion in October, a 4 percent month-on-month increase. This was well above the 2023 average of $163 billion.
Global over-the-counter (OTC) gold trading rose 4 percent month on month to 181 billion per day.
Inflows of gold into ETFs can have a significant impact on the global gold market by pushing overall demand higher.
ETFs are a convenient way for investors to play the gold market, but owning ETF shares is not the same as holding physical gold.
A gold ETF is backed by a trust company that holds metal owned and stored by the trust. In most cases, investing in an ETF does not entitle you to any amount of physical gold. You own a share of the ETF, not gold itself.
ETFs are relatively liquid. You can buy or sell an ETF with a couple of mouse clicks. You don’t have to worry about transporting or storing metal. In a nutshell, it allows investors to play the gold market without buying full ounces of metal at the spot price.
Since you are just buying a number in a computer, you can easily trade your ETF shares for another stock or cash whenever you want, even multiple times on the same day. Many speculative investors take advantage of this liquidity.
But while a gold ETF is a convenient way to play the price of gold on the market, you don’t actually possess any gold. You have paper. And you don’t know for sure that the fund has all the gold either, especially when the fund sees inflows.
In such a scenario, there have been difficulties or delays in obtaining physical metal.