For the first time in 10 months, gold flowed into ETFs in March with global gold ETFs recording net inflows of 32 tons, representing an increase of about $1.9 billion.
The price of gold was up 9% in March, fueled by demand for the yellow metal as the financial crisis unfolded. Overall, global gold ETF total assets under management (AUM) rose by 10% to $220 billion by the end of March. Inflows of metal into funds and the rising price of gold both contributed to the surging AUM.
Europe-based funds led gold inflows in March, adding 18 tons. UK funds accounted for the majority of inflows. According to the World Gold Council, poor stock market performance, systemic risk fears from the banking crisis, and the 6% increase in the price of gold in euros boosted European gold ETF demand.
North American funds charted net gold inflows of 12 tons in March. The WGC said, “The strength in the gold price improved gold ETFs’ attractiveness.”
Asian funds also reported net inflows of gold, adding about 3 tons in March. This represented a significant 2.9% increase. Chinese funds drove the increase due to poor equity performance and a surge in the local gold price, according to the World Gold Council.
Other regions, including Australia, reported net outflows of 1 ton.
Global gold market daily trading volume averaged $183 billion in March, surging by 25% month on month. It was the highest daily trading volume in a year and 39% above the 2022 average.
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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