Globally listed gold exchange traded products, including the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU), are on an impressive asset-gathering streak. As of the end of the first quarter, gold ETFs listed around the world are on a five-quarter asset-gathering streak.
The good times continued in April when “global gold-backed ETFs holdings added 72.2 tonnes(t) to 2,481t in April. This is the strongest month of net inflows in more than a year,” according to the World Gold Council (WGC).
As the dollar has strengthened, GLD and other gold ETFs have recently given back some gains and are now flat on a year-to-date basis. Additionally, global gold demand dipped in the first quarter, but ETFs were an exception.
Rising inflation is still seen as a catalyst for gold and if the yellow metal and can climb toward $1,400 per ounce, that could be significant on a technical basis.
Demand Drivers for Gold
IAU and GLD, the world’s largest gold-backed ETF, drove demand for gold ETFs in April.
“North American funds continue to account for the overwhelming majority (54%) of gross global inflows, led by iShares Gold Trust (45t, US$1.9bn), SDPR Gold Shares (33.7t, US$1.5bn). Elsewhere, Xtrackers Physical Gold (15.6t, US$0.7bn) and Bosera Gold (11.7t, US$0.5bn) have also captured significant flows,” said the WGC.
GLD is the largest physically backed gold ETF on the market, providing investors exposure to gold price movement in an easy-to-use investment vehicle. The ETF is backed by physical gold bars stored in London vaults. The gold trust currently holds about 27.2 million ounces of gold, so each SDPR Gold Shares represents fractional ownership of the underlying gold.
Gold bullion has revealed strength in recent weeks, breaking out on a technical basis partly due to a more dovish-than-expected Federal Reserve stance on interest rate policies, trade war speculation that fueled safe-haven bets and a relatively weak U.S. dollar that helped support demand for the USD-denominated gold bullion.
“Holdings in Asian gold-backed ETFs remained in the red, down 1.4t so far this year – this has been primarily the result of Bosera migrating assets from its non-listed to its listed fund,” according to the WGC.
For more information on the gold market, visit our gold category.
Tom Lydon’s clients own shares of GLD.