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In 2020, the global gold ETF net inflow reached 877 tons, and the total holdings hit a record high

15 January 2021


Regardless of the standard, gold ETFs and similar products (gold ETFs) performed well in 2020. In 2020, the global net inflow of gold ETFs was as high as 877 tons (approximately US$47.9 billion), and their total holdings increased by more than one-third, setting a record high of 3,752 tons. It is worth noting that the size of gold ETF asset management (AUM) in all regions has seen significant growth-more than any central bank gold reserves except the United States, and only more than the United States in Fort Knox (Fort Knox) ​​reserves 15% less.


The ultra-low interest rate environment promoted the net inflow of gold ETFs in January and February. Starting in March, the global spread and growing severity of the new crown pneumonia epidemic has further increased people's investment demand for gold. In the second half of the year, risks are increasing. Governments of various countries have introduced stimulating fiscal and monetary policies in response to the impact of the new crown epidemic on the economy. The strong increase in gold prices has further driven the net inflow of gold ETFs. At the beginning of August, the price of gold once climbed above US$2,000 per ounce, setting a record high. Since then, the growth rate of the global gold ETF has slowed down, and then the price of gold has fallen back to the level of $1,900 per ounce.


Compared with other forms of physical gold investment, the strong performance of gold ETFs is particularly outstanding. Under the influence of the new crown epidemic, the global demand for gold bars and gold coins is mixed: the strong demand in the Western market is in sharp contrast to the sluggish demand in the Eastern market before it resumes in the third quarter. In the first three quarters of 2020, gold ETFs accounted for almost two-thirds of total global gold investment demand, much higher than any previous year. At the same time, demand for gold ETFs in 2020 has reached a quarter of the average annual gold production of the past five years.


However, the end of the US election and the successful development of the new crown pneumonia vaccine boosted market sentiment. Investors' risk appetite rose accordingly, leading to a net outflow of 109 tons of gold ETFs in November. Although this situation continued until December, the outflow rate slowed down significantly, and the net outflow in December was only 40 tons.


In the first three quarters of 2020, the total asset management scale of global gold ETFs increased by 1,007 tons, while in the fourth quarter there was a net outflow of 130 tons. The regions with the most outflows are North America (open positions decreased by 86 tons, asset management scale decreased by US$5 billion, which is about 4% of the total scale, the same below) and Europe (-35 tons, US$2.2 billion, -2%). Gold ETFs in Asia flowed out 4.7 tons (-255 million U.S. dollars, -3%), while funds listed in other regions (-4.4 tons, -257 million U.S. dollars, -7%) also experienced net outflows.


The net outflow of gold ETFs slowed down significantly in December. Although Asian funds have fallen the most relative to their size (-1.7%), North American (-1.2%) and European (-0.8%) funds have again experienced the largest net outflows. In December, the total global gold ETF holdings fell by 40 tons ($2.2 billion, -1.0%).


Gold price performance and trading volume in 2020

The price of gold denominated in US dollars rose by 25% in 020 and hit a record high of US$2,067.15 per ounce on August 6. In March, the global market was hit by the new crown pneumonia epidemic, and the price of gold fell by 12%. However, at the end of the year, the price of gold rebounded and became one of the best performing assets in 2020. The volatility of gold prices in 2020 has also increased, with an annualized volatility of 20%, the highest level since 2013, and much higher than its long-term average of around 16%. However, investors should view the rise in gold price volatility based on the volatility of all assets. In 2020, the volatility of most assets will increase. For example, the annual volatility of the S&P 500 index is as high as 32%, which is almost twice its long-term average of 18% [5].

The trading volume of the global gold market has also increased. The global average daily trading volume of gold in 2020 was US$182.7 billion, much higher than the average daily trading volume of US$145.7 billion in 2019. Even in April and December, when the market was relatively sluggish, the average global gold trading volume still reached a high of $139.9 billion and $143.2 billion.


According to the CFTC position report, the net long position of COMEX gold futures fell to the lowest level of 716 tons in November, but recovered to 816 tons by the end of the year, which is also the highest level since September. Although this is lower than the annual average of 873 tons, it is significantly higher than the 10-year long-term average of 529 tons. In general, due to the strong rise in the price of gold, the net long position of gold futures in 2020 has increased.


We believe that the net long gold position at the end of 2020 did not reach or exceed the historical high of 1,209 tons at the beginning of the year. This is because the cost of holding futures is due to the gold futures market and the spot market in March compared to other investment products such as OTC and gold ETFs. The decoupling has risen sharply. Many investors may convert futures to over-the-counter or gold ETFs, or they may withdraw from the gold market altogether.


Drivers of gold demand in 2021

Although it has entered 2021, many drivers of gold demand in 2020 will continue, such as lower interest rates and reduced opportunity costs, fiscal stimulus measures, excessively high valuations in the stock market, and the continued impact of the new crown epidemic on the economy. In the published "Gold Market Outlook 2021", we have delved into some of the driving factors.


Changes in regional traffic in 2020


All regions of the world have seen strong net inflows:


North America: a net inflow of 563 tons (31.9 billion US dollars, 45%);


Europe: Open interest increased by 260 tons ($13.3 billion, 21%);


Asia: Open interest increased by 38 tons (US$1.9 billion, 49%);


Other regions: the inflow was 16 tons (8999 million US dollars, 41%)


Changes in specific fund flow in 2020

SPDR® Gold Shares and iShares Gold Trust lead the global net inflow of gold, accounting for more than 50% of the global net inflow of funds:


North America: SPDR® Gold Shares holdings increased by 277 tons ($15.4 billion, 35%), iShares Gold Trust net inflow was 165 tons ($9.5 billion, 54%), followed by SPDR® Gold MiniShares, which increased by 43 tons ($2.5 billion) , 217%)


Europe: UK funds have the highest net inflows, led by iShares Physical Gold (91 tons, US$4.9 billion, 70%) and InvescoPhysical Gold (84 tons, US$4.8 billion, 67%). However, WisdomTreePhysical Gold (-26 tons, US$1.5 billion, -20%) listed in the UK has the highest net outflow in Europe. Swiss UBS ETF gold (-23%), British Gold Bullion Securities (-6%), and Germany's XtrackersPhysical Gold (-28%) also experienced large net outflows;



Asia: With the growth of Asian fund assets, seven new Chinese gold ETFs were listed during the year.


Long-term trend


The total inflow of gold ETFs in 2020 reached 877 tons, an increase of nearly 231 tons from the record 646 tons in 2009:


Although the inflow in the first 10 months of 2020 set a new record, there was a net outflow in November and December, although the situation was reversed in early 2021;


The strong demand for gold investment through ETFs is still the main driver of overall gold demand;


North American funds contributed nearly two-thirds of the net inflow of global gold ETFs in 2020;


Although low-cost gold ETFs continued to maintain a certain growth at the end of 2020, their total outflows more than doubled year-on-year.


(The above content does not constitute investment advice or operation guide, enter the market according to this, at your own risk)