For the second straight month, gold flowed into ETFs in April.
Globally, gold-backed ETFs reported net inflows of 15 tons last month, reflecting an increase of about $824 million.
This follows on the heels of a 32-ton increase in ETF gold holdings in March after 10 straight months of net outflows.
Global gold ETF total assets under management (AUM) rose 1% to $221 billion by the end of April, with total gold holdings rising to 3,459 tons.
Declining yields and a sliding dollar pushed April’s average gold price to the highest level in a year. The gold price ended April with a modest gain of 0.1%.
North American funds led the way, adding 15 tons of gold in April. According to the World Gold Council, weaker-than-expected economic data worsened investors’ recession fears. This suppressed Treasury yields and lifted safe-haven demand for gold. The positive gold price performance during the month may have also contributed to gold inflows into ETFs.
After leading the way in March, flows of gold into European-based ETFs turned negative in April with a small outflow of 0.7 tons. Stubbornly high inflation and the anticipation of further rate hikes by the ECB may have dampened enthusiasm for gold in the EU. UK and German funds saw the largest outflows.
Funds listed in Asia saw modest inflows of 0.1 tons. Outflows from Chinese funds were offset by Japanese and Indian inflows.
Other regions recorded gold inflows of 1 ton, with almost all of the total contributed by Turkish ETFs.
Gold flows into ETFs were muted earlier this year even as physical gold investment demand rose close to record levels in the first quarter of 2023.
Global gold market daily trading volumes fell to $170 billion in April, 7% lower month-on-month. Nevertheless, trading volumes remained 29% above the 2022 average of $132 billion.
Inflows of gold into ETFs are significant in their effect on the world gold market, pushing overall demand higher.
There’s a difference between investing in gold-backed ETFs and physical gold. Learn more here.
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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