Gold fever dominated by ETFs in 2020

Gold-backed ETFs (exchange-traded funds) and similar products (gold ETFs) recorded their eighth consecutive month of positive flows, adding 166 tonnes in July – equivalent to US$9.7bn or 4.1% of assets under management (AUM).

An exchange-traded fund is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, gold, platinum and other commodities, or bonds and generally operates with an arbitrage mechanism designed to keep it trading close to its net asset value, although deviations can occasionally occur.

Global holdings have once again reached a new all-time high of 3,785t and the price of gold hit a record high of US$1,976/oz by the July-end, leaving global AUM standing at $239bn. Global net inflows of 899t (US$49.1bn) to date are considerably higher than previous annual highs, and the trend of inflows has continued in the first few trading days of August as the price of gold has breached US$2,000/oz.

Whereas all regions had net inflows in July, North American funds, once again, led by a significant margin, accounting for 75% of global net inflows. The region added 118t (US$7.0bn, 5.5% AUM).

European-listed funds added 40t (US$2.1bn, 2.1% AUM). Asian-listed fund holdings rose meaningfully during the month, by 4.9t (US$370mn, 5.6% AUM). Funds listed in other regions registered a 3.4t (US$218mn, 5.5% AUM) gain.

Generally, July was remarkable for several ‘all-time’ highs:

  • The S&P 500 reached a monthly closing high
  • US 10-year yield finished at an all-time low of 0.53%
  • The highly concentrated Nasdaq (with the top five companies representing 45% of the index) reached record levels, increasing 20% in 2020
  • Silver had its strongest monthly performance ever, rallying 34%
  • Gold reached its highs, rallying by 11% and, as of the end of July, is higher by nearly 30% on the year.


While the price of gold reached all-time highs in nominal terms, it remains below the inflation-adjusted record, which is US$2,800 or 42% higher. While bullish sentiment was at extreme levels in February 2020 at 1,209t (US$63bn), it subsided meaningfully to 863t in July (US$55bn).

Global gold trading volumes rose sharply to US$194bn a day in July, up 24% from US$167.6bn in June. Daily trading volumes remain below the y-t-d record of US$233bn seen in March, but comfortably above the 2019 daily average of US$145.7bn.


The current market environment highlights the multi-faceted nature of gold price behaviour. Economic weakness has significantly hurt jewellery, bar and coin and technology demand, which have averaged 86% of total gold demand over the past 10 years.

But geopolitical and economic uncertainty remains supportive for gold investment, and with real rates near or at all-time lows globally, the cost of holding gold remains low. Finally, investment demand and momentum appear to be more than offsetting the shortfall driven by economic weakness .

With the recent demand shift, only 32% of demand came from jewellery, bar and coin and technology in Q2 2020, with the remainder coming from investments – like gold ETFs – and central banks.

The ultimate effect of the COVID-19 pandemic is still very much unknown. The true state of the economy may not be reflected in across all market environments. Record stimuli and easy money by central banks appear to have driven investments in equities higher, despite weak economic indicators.

Ultimately, it could be the behaviour of central banks – with their continued expansionary monetary policy – that drives gold higher. This impact played key role in prompting the multi-year bull market in the price of gold following the Great Financial Crisis and subsequent Quantitative Easing.

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