Gold ETFs Shine Brighter with Consistent Inflows: A Positive Trend for 2023

According to the World Gold Council, inflows on gold-backed exchange-traded funds (ETFs) enjoyed positive inflows throughout the month of May, providing the precious metal with an impressive level of support. ETFs recorded 19.3 tons of net inflows during May, marking the third consecutive month of net increases. The total inflow values have now reached $1.66 billion.

With May’s successes, 2023’s first five months of net incomes have now reached $1 billion, while holdings have risen by 6 tons.

The World Gold Council believes that “strong price momentum earlier in the month incited investors’ interests in gold ETFs before giving some back towards the end of May as the gold price pulled back.” With more uncertain economic factors dwindling in the back of investors’ minds, it only makes sense that safe-haven assets are on the rise.

“U.S. debt ceiling negotiations and looming banking industry concerns also led investors to seek safe-haven assets, contributing to the positive trend in May,” the World Gold Council continued on to explain.

By the end of May, global funds carried over 3,478 tons of gold bullion, according to World Gold Council data. With that being said, the total managed assets slightly dipped by 0.4% to $220 billion because of the slight drop in gold prices in April. Such trends may be a significant contributing factor to the rise in ETF popularity in comparison to physical assets.

North America remains one of gold’s primary demand regions, driving this trend. Nearly all continents continue to influence the market as we progress through 2023, aside from Europe, which has remained quiet in the market lately.

Buyer interest from North America reigns supreme, per usual. Recorded net inflow funds from North America reached $1,399 billion last month alone, displaying that holdings increased by a whopping 21.2 tons from April’s lulling levels. By the end of the month, aggregate levels held strong at 1,773.7 tons.

Investor concerns over a volatile market combined with an attractively “notable price rebound before the expiry date of major gold ETFs’ options” likely contributed to the increased level of North American holdings in May, according to the World Gold Council. An unsteady economic environment, combined with appealing, stable assets, typically only means positive things for gold, and we’re seeing that play out to a T here.

While the European market may be behind compared to North America, its fund flows remained positive, with a recorded net of 228.4 million during May. That being said, the region had net outflows of 2.1 tons, meaning its total holdings came to 1,523 tons.

The World Gold Council stated that “this difference was mostly due to the mechanics of FX-hedged products in Switzerland and Germany, especially amid currency fluctuations related to U.S. debt ceiling uncertainty.” The U.K. and France were primarily in charge of the positive fund flows during May.

Inflows rose in Asia, with the net figure coming to 0.1 tons during May, equating to $8.6 million. While funds in China reported consistent outflows, vehicles in Japan and India successfully offset these figures, allowing for a slight inflow for the month. By the end of the month, the region recorded 118.2 tons of metal.

Speaking of slim successes, ETFs in South Africa, Saudi Arabia, Turkey, the United Emirates, and Australia increased by 0.04 tons during the month of May, equating to $24.5 million. The World Gold Council noted that the high level of political uncertainty in Turkey may have been the primary driving factor behind this rise. Total holdings in the region increased to 63.4 tons by the end of the month.

ETFs remain a popular investment choice among precious metals traders as we progress through 2023. On Monday, State Street Advisors released an investment study that revealed key insights regarding average investor behavior based on survey results and other data points.

Based on the survey, the report stated that 20% of all investors have gold in their portfolios. Of this group, gold investors, on average, allocate 14% of their portfolio to gold bullion and 49% to gold ETFs. State Street Investors believes this rise in ETFs will continue for quite some time.

“According to the study, among investors who invest in gold, more than half are likely to increase their investment in the next six to 12 months, with the percentage of investors in gold ETFs (57%) slightly outweighing investors who may also hold other types of gold assets (e.g., bars and coins, gold mining stocks, commodity funds, etc.) at 53%,” the study explained.

As always, investors should consult their financial advisors before making any portfolio decisions.

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