Global Gold ETF Holdings Dipped Even as North American Funds Saw Inflows

The presidential election brought us the "Trump shock" and a healthy correction in the gold market. We saw this reflected in gold flows out of ETFs globally for the first time since April.

While gold continued to flow into North American-based funds, all of the other regions charted outflows, with net global ETF gold holdings dropping by 29 tonnes in November.

Assets under management (AUM) by ETFs dropped 4 percent with a combination of gold outflows and falling prices. Nevertheless, AUM flows remain positive on the year at $2.6 billion. 

Despite weaker gold prices and aggressive risk-on positioning after the election, gold continued to flow into North American ETFs. Holdings increased by just under one tonne, valued at $79 million. Demand was primarily driven by Canadian-based funds.  

According to the World Gold Council, U.S. funds recorded outflows through the first half of the month but experienced a rebound into the end of the month as the market started pricing in a weaker dollar and lower yields following Scott Bessent’s nomination as Treasury Secretary.

"We also believe demand has found a floor of support due to the expectation for lower yields, a continuation of heightened geopolitical risk, and uncertainty around the implementation of future policy shifts and their global impact under the Trump administration."

European funds have been shedding gold for several months, and that trend continued in November. Outflows totaled 26 tonnes.

The World Gold Council noted four factors squeezing the European gold ETF market. 

1. Weaker-than-expected macro-economic data
2. Broader concerns around trade tariffs from the future Trump administration
3. Central bank rate path uncertainty
4. Financial market behavior shifting to risk-on

A big drop in the euro against the dollar has also squeezed gold in the eurozone. 

Asian funds recorded gold outflows for the first time in 20 months in November. The drop in the gold price dimmed investor interest in China, driving outflows of 2.2 tonnes in the region. However, Indian ETFs reported inflows for the eighth straight month, attracting $175 million last month. 

Funds in other regions, including Australia and Africa, reported gold outflows of 0.8 tonnes. Australia led outflows driven by local equity strength, elevated yields, and a weaker gold price.

Gold trading volumes rose for the third straight month in November. They were up 8 percent despite the falling gold price. Both futures trading volumes at COMEX (+50 percent) and Shanghai Futures Exchange (+33 percent) charted notable gains.

Total net longs of COMEX’s gold futures ended November at 768 tonnes, a 15 percent dip month-on-month. Money managers reduced their net long positions by 16 percent to 616 tonnes by the end of the month.

Global over-the-counter (OTC) gold trading saw an 8 percent fall to $167 billion.

ETFs are a convenient way for investors to play the gold market, but owning ETF shares is not the same as holding physical gold.

A gold ETF is backed by a trust company that holds metal owned and stored by the trust. In most cases, investing in an ETF does not entitle you to any amount of physical gold. You own a share of the ETF, not gold itself.

ETFs are relatively liquid. You can buy or sell an ETF with a couple of mouse clicks. You don’t have to worry about transporting or storing metal. In a nutshell, it allows investors to play the gold market without buying full ounces of metal at the spot price. 

Since you are just buying a number in a computer, you can easily trade your ETF shares for another stock or cash whenever you want, even multiple times on the same day. Many speculative investors take advantage of this liquidity.

But while a gold ETF is a convenient way to play the price of gold on the market, you don’t actually possess any gold. You have paper. And you don’t know for sure that the fund has all the gold either, especially when the fund sees inflows. In such a scenario, there have been difficulties or delays in obtaining physical metal.

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