At a time when stocks globally witnessed huge sell-offs and volatility, holdings in gold-backed exchange traded funds ( ETFs) reached an all-time high in March.
According to the World Gold Council, March capped a record-breaking quarter as gold ETF holdings and assets added $23 billion in net inflows — the largest quarterly gain in history.
“Global gold-backed ETFs and similar products added 298 tonnes, or net inflows of $23 billion, across all regions in the first quarter of 2020 — the highest quarterly amount ever in absolute dollar terms and the largest tonnage additions since 2016,” the World Gold Council said in a report.
Further, trading volumes and assets under management (AUM) reached record highs as gold volatility increased to levels last seen during the financial crisis, even as gold price performance was mostly flat in dollars for the month.
The global body has highlighted the fact that uncertainty around the short-and long-term economic impacts of COVID-19 continues to drive sharp volatility across many assets, leaving global equities in the bear market territory, while encouraging inflows into safe havens like treasuries and gold.
Strong inflows
“Against this backdrop, gold ETFs listed in all regions experienced strong inflows during the month. European funds led regional inflows, growing by 84 tonnes ($4.4 billion, 5.8% AUM), while North American funds added 57 tonnes ($3.2bn, 4%). Asian funds – primarily in China – also finished the month with strong inflows, adding 4.9 tonnes,” stated the report. Going ahead, the World Gold Council expects the recent drivers of investment demand to continue. The drivers are primarily widespread market uncertainty and the improved opportunity cost of holding gold as yields move lower.
“We have found that lower rates have a positive impact on gold prices and offer the opportunity for additional gold exposure [potentially replacing bonds] in a low-rate environment,” said the report.
