Gold Flowed Out of North American ETFs Last Month; Global Holdings Up on the Year

Gold Flowed Out of North American ETFs Last Month; Global Holdings Up on the Year from Schiff Gold

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European gold-back ETFs continued to add yellow metal in June, but globally, total holdings fell for the first time in nearly a year as gold flowed out of North American and Asian funds.

Global gold-backed ETF holdings fell by 49.3 tons to 2,434 tons in June, according to the latest data released by the World Gold Council. It was the first month of net outflows since July 2017.

Even with the sharp June drop, total ETF gold holdings globally remain up on the year by 63 tons.

North American funds accounted for virtually all of the June drop, as they shed 44.4 tons of gold last month. This follows a 30-ton outflow in May.

Meanwhile, European funds added a small amount of gold last month, with inflows totaling 0.5 tons. Funds listed in Asia saw outflows of 3.5 tons.

The outflow of gold from ETFs isn’t surprising in light of the steep decline in the price of the yellow metal last month. According to the World Gold Council, outflows in North America were driven by “US dollar strength and a declining gold price.”

 Investors seemed to shrug off poor equity market performance and escalating global trade tensions, pushing the gold price down by 4.2% in June.”

On the year, gold holdings in North American funds have gone slightly negative after impressive inflows during the first quarter. European and Asian funds have made up the difference. European funds have added $2.5 in gold (5.9% AUM) to their holdings. Asian funds have seen an impressive percentage increase, growing by 15% y-t-d.

Overall globally, funds have recorded net inflows of gold in 2018. The movement of the yellow metal into ETFs over the last two years and continuing into 2018 reverses a 3-year trend of outflows between 2013 and 2015.

Inflows of gold into ETFs are significant in their effect on the world gold market, pushing overall demand higher.

ETFs are backed by physical gold held by the issuer and are traded on the market like stocks. They allow investors to play gold without having to buy full ounces of gold at spot price. Since their purchase is just a number in a computer, they can trade their investment into another stock or cash pretty much whenever they want, even multiple times on the same day. Many speculative investors appreciate this liquidity.

There are good reasons to invest in ETFs, but they aren’t a substitute for owning physical metal. In an overall investment strategy, SchiffGold recommends buying gold bullion first.

When considering gold-backed ETFs, you should always keep in mind that you don’t actually own the gold. Buying the most common ETFs does not entitle you to any actual amount of the precious metal.

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Peter Schiff

Mr. Schiff began his investment career as a financial consultant with Shearson Lehman Brothers, after having earned a degree in finance and accounting from U.C. Berkeley in 1987. A financial professional for more than twenty years, he joined Euro Pacific in 1996 and served as its President until December 2010, when he became CEO. An expert on money, economic theory, and international investing, he is a highly sought after speaker at conferences and symposia around the world. He served as an economic advisor to the 2008 Ron Paul presidential campaign and ran unsuccessfully for the U.S. Senate in Connecticut in 2010.