A Gold ETF Drive Through The Election And European Funds | ETF Trends

Amidst everything going on, Gold has continued to be a reliable area for investors. Based on new data from the World Gold Council, Gold-backed ETFs continued their run of inflows with October, marking the 11th consecutive month of net inflows, though at a significantly slower pace and the lowest monthly increase of 2020. With that in mind, there is the question of how much influence the election will have on Gold’s performance.

While investors are closely following the U.S. election for a variety of reasons, it is just one of many factors that influence gold on a global level. With that in mind, any of the outcomes of the election will probably support one or several of the key drivers when it comes to the demand for gold investment.

A Trump win could be supportive enough, though trade tensions may resurface, leading to a very accommodative monetary policy. Biden winning could create concerns over higher taxes and corrections in the stock market. However, that could be seen as more conciliatory in terms of trade. A contested election, however, could ultimately lead to an uncertain period for financial markets.

Adam Perlaky, Manager, Investment Research at the World Gold Council had plenty of things to say in a recent blog post, but also notes, “As the markets navigate the implications of the US election and ongoing COVID-19 challenges, we expect continued uncertainty to be supportive of gold’s positioning as a long-term strategic asset.”

Given the varied environment advisors and investors are dealing with, there should preparations for ongoing high volatility as market conditions adjust to emerging developments.

There’s also the international markets to consider. Recent data shows that Gold ETF holdings increased by only $1.4 billion, with European funds driving nearly all of this increase for the month.

As explained by Perlaky, “While inflows into gold-backed ETF inflows slowed in October, the overall trend remains positive with holdings in tonnage and value terms continuing to reach new highs. We expect demand to remain strong as investors navigate market volatility and a low-rate environment.”

Additional October Highlights

  • Regionally:
    • European funds led inflows with an addition of US$1.4bn (20.2t, 1.4% AUM)
    • North American funds added US$166mn (1.8t, 0.1%)
    • Asian funds also had small inflows, adding US$76MN (1.8t, 1.1%)
    • Funds listed in other regions experienced outflows relative to their size of US$144mn (2.8t, 3.8%)
  • Gold price moved mostly sideways, finishing slightly below US$1,900/oz, and daily gold trading volumes fell meaningfully to US $159bn, below the YTD average of US$186bn.
  • Despite October’s slower pace, 2020 inflows to date have driven global gold ETF holdings to a new all-time high of 3,899t (US$235bn in AUM), with a collective growth of 24%.

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