Global gold-backed exchange-traded funds (ETF) recorded 10 consecutive months of net inflows during September — the third time this feat has been achieved since the Financial Crisis. Notably, the last two times there have been instances of 10 straight months of inflows were in the period spanning June 2007-March 2008 and January 2016-October 2016. In the first nine-month period of 2020, global net inflows of Gold ETFs were at 1,003 tons ($55.7 billion) per the World Gold Council, surpassing the previous record of 646 tons achieved in 2009.
Notably, Gold ETF net inflows have crossed the 1,000 tons mark for the first time ever. Global gold ETF holdings have peaked to an all-time high of 3,880 tons, as of September end. The pandemic and its devastating impact on the global economy have influenced investor’s risk appetite and boosted safe haven demand for gold this year.
Over the January-September timeframe, SPDR Gold Shares, iShares Gold Trust and iShares Physical Gold ETC were the top three performers, adding 375.5 tons, 158.1 tons and 108 tons, respectively, collectively accounting for around $36 billion of inflows.
North American Funds Dominate
Overall, for the first nine months of 2020, all regions saw net inflows led by the North American funds, which boosted the holdings by 648.9 tons or $36.7 billion. During this period, European-listed funds added 291.9 tons (equivalent to $15.5 billion), while Asian-listed fund holdings rose 41.8 tons or $2.3 billion. Funds listed in other regions added 20.7 tons or $1.1 billion.
Gold Prices Up 23% YTD
Gold prices have had a stellar run so far this year, clocking a 23% gain, mainly riding on the high level of uncertainty stemming from the COVID-19 pandemic. The yellow metal continues to outperform other major asset classes this year. Gold prices had even attained an all-time high of $2,089.20 an ounce on Aug 7. Gold futures for December delivery settled at $1,895.10 an ounce on Oct 8, 2020, after touching a high of $1,905.3 an ounce.
How Will Gold Fare in the Remaining of 2020?
Gold will continue to be the preferred investment option courtesy of the low interest-rate environment and the pandemic-induced global slowdown. Ongoing concerns over the surging COVID-19 infection rates in various locations and a likely second wave as economies reopen will also fuel gold prices. The uncertainty over the upcoming U.S presidential election will also boost safe-haven demand for the yellow metal.
With China recovering from the pandemic-induced slowdown, gold demand could get a significant boost in the upcoming holiday season. Also, India remarkably received healthy monsoon rainfall for the second straight year. Around 60% of the gold demand in the country is tied to the rural populace, which depends on monsoon. This could help counter the negative impact of COVID-19 in rural areas. Further, historically, gold demand in India has been high in the later part of the year thanks to the wedding and festive seasons, when buying the yellow metal is considered auspicious.
While demand remains strong, gold supply is expected to remain constrained in 2020 due to the suspension of mining operations in the earlier part of the year, in accordance to government mandates. Consequently, the impending demand-supply imbalance situation will work in favor of the metal’s prices.