Gold exchange-traded funds (ETFs), such as the SPDR Gold Shares (NYSEArca: GLD) and SPDR Gold MiniShares (NYSEArca: GLDM), are clinging to modest year-to-date gains. In March, holdings of bullion in gold ETFs rose slightly, according to a new report from the World Gold Council (WGC).
GLD is the largest and most heavily traded gold ETF, offering strategic, long-term investors relatively low entry and rebalancing costs, plus robust optionality.
Investors have looked to GLD as a quick and easy way to gain exposure to gold price movements as they hedge against market risks, help protect their purchasing power in times of inflationary pressures or capitalize on increasing demand from the emerging markets with a growing middle-income class.
“Gold-backed ETFs and similar products account for a significant part of the gold market, with institutional and individual investors using them to implement many of their investment strategies,” according to the WGC. “Flows in ETFs often highlight short-term and long-term opinions and desires to holding gold.”
Regional Gains
Across all regions, gold ETFs saw slight holdings gains in March.
“All regions saw marginal increases in holdings. Interestingly, by month-end, North American funds had fully reversed the US$2bn in outflows seen earlier in the month,” said the WGC. “The reversal coincided with a rally in gold, in US dollar terms, which was linked to the Fed’s adoption of a more neutral monetary policy stance. Our recent report The impact of monetary policy on gold finds that, historically, a change in the Fed’s policy from tightening to neutral results in gold increasing meaningfully over the subsequent 12 months.”
While U.S. equities posted one their best first-quarter performances on record, gold trading volumes surged in March.
“In March, gold trading volumes increased 15% above the 2018 averages to US$125 billion per day. Sentiment and positioning in COMEX futures continued to increase from their lows, as the price of gold moved higher during the second half of the month. However, these levels still remain below historical averages,” notes the WGC.
Year-to-date, investors have pulled $980.21 million from GLD, but the cheaper GLDM has seen inflows of almost $256 million.
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