Gold ETF buying
According to a report by the World Gold Council (or WGC), holdings in gold ETFs rose for the second consecutive month in November to 21.2 tons to a total of 2,365 tons. It also said that the global gold-backed ETF flows are now positive in US dollar (UUP) terms for the year. ETF flows were positive for the first time in four months. The renewed buying interest from investors was on account of increased market volatility and the equity market sell-off.
While physical gold buying usually gets a boost from lower prices, ETF inflows usually occur when investors are convinced that prices are in an uptrend. WGC also stated that the flows in November were positive across all regions with European funds leading the global inflows as Brexit concerns increased and sterling weakened. While North American funds saw inflows for the second straight month, they remained negative for the year.
Restoration in gold’s safe-haven status
While gold prices have languished for the most part of 2018, October saw a resurrection in the metal’s safe-haven appeal. During October and November, gold prices gained 2.5%, while the S&P 500 (SPY) was down 5.0%, and the NASDAQ Composite (QQQ) fell 8.9%. The SPDR Gold Shares (GLD), the world’s largest gold-backed ETF, led the inflows with 7.7 tons in November while the iShares Gold Trust (IAU) added 5.4 tons.
ETF holdings and gold prices
There is a lot of uncertainty and volatility in the current economic macro environment with trade tensions continuing and geopolitical issues ramping up. Moreover, as fears of a US slowdown weigh on investors’ minds as the impact of tax reform and share buybacks wane going forward, gold could be the go-to asset. Further recovery in prices could support stock prices for gold companies (GDX) such as Barrick Gold (ABX), AngloGold Ashanti (AU), B2Gold (BTG), and Yamana Gold (AUY). Collectively, these four stocks form 13.7% of the VanEck Vectors Gold Miners ETF (GDX).