The latest data released by the World Gold Council (WGC) on Wednesday showed that global gold ETF outflows slowed significantly in November, supported by net inflows from North American funds and driven by geopolitical risks and investor positions.
WGC's liquidity and holdings report states: "In November, there was a slight outflow of $920 million in physically supported gold ETFs worldwide, significantly lower than the previous month." "Holdings decreased to 3236 tons, a decrease of 9 tons in November, while total assets under management increased by 2% to $212 billion, supported by a significant 2% increase in gold prices."
In November, North American funds ended five consecutive months of outflows from the region, attracting a net inflow of $659 million. The WGC wrote, "In November, the Federal Reserve held interest rates unchanged for the second consecutive meeting, and investors' expectations of the end of the tightening cycle were advanced." "The slowdown in inflation and the cooling of the job market intensified these expectations, further suppressing US bond yields and the US dollar."
But the report points out that most of the support for gold prices and ETF fund flows comes from "increased geopolitical risks at the beginning of this month" and subsequent position adjustments by investors. They said, "The rise in gold prices before the expiration of major gold ETF options on November 17th has also brought considerable capital inflows."
Europe has experienced capital outflows for six consecutive months, selling nearly $2 billion in November. The report points out that "due to the region's bond yields remaining at a 10-year high, opportunity costs continue to dampen European investors' interest in gold ETFs." "At the same time, the strengthening of the domestic currency (weaker performance of domestic currency gold prices compared to the US dollar) has also dampened investor interest."
WGC did point out that foreign exchange hedging products primarily in Switzerland experienced net inflows during the month, partially offsetting outflows in November, while funds listed in Germany experienced the largest outflows in the region.
They said, "In November, Asian funds continued to restrict capital inflows (+$47 million), although not on a large scale." The inflows from India and Japan exceeded the outflows from China. "Other regions have experienced slight capital outflows (- $21 million), mainly from funds in Australia and South Africa."
In November, it also drove the outflow of funds from global gold ETFs to nearly $14 billion from the beginning of the year, with European funds contributing the most. North America remains severely negative this year, while Asia remains the only region to experience net inflows this year.
The report states: "In North America, the surge in US bond yields between June and October resulted in outflows of funds during the same period (- $9 billion), exceeding the remaining inflows of funds this year (+$4 billion)." "In the past 11 months, outflows from European funds reached $9 billion, the most severe among all regions, and this is also due to the rise in European interest rates (diverting investors' attention from gold)." Driven. Germany and the UK have led the outflow of funds from the region so far this year
Driven by China, Japan, and India, the total inflow of funds to Asia so far this year has reached 1 billion US dollars. They said: "So far this year, the accumulated capital outflow from other regions has reached 103 million dollars, and the capital outflow from other regions has exceeded the capital inflow into Türkiye."
Gold ETFs and similar products account for a large portion of the gold market, and institutional and individual investors use them to implement many of their investment strategies. The flow of funds in ETFs often highlights the short-term and long-term views and desires towards holding gold.
The data in the report tracks the physical holdings of gold by open-end ETFs and other products such as closed-end funds and mutual funds. Most of the funds in the data are entirely supported by physical gold.
The report states, "So far this year, the collective holdings of global gold ETFs have decreased by 7%, while total assets under management have increased by 5% due to the rise in gold prices."
As for market positions, WGC wrote that the net long position in the gold futures market increased last month.
WGC pointed out that "the average daily trading volume of the global gold market is $174 billion, a 3% increase compared to the previous period." "Although trading activity of gold ETFs has significantly decreased (-26%), the OTC market has remained almost unchanged (0%), and trading volume of other exchange traded products has increased by 10%."
The majority of this 10% increase is contributed by COMEX. They said, "COMEX's net long position further increased, with a total of 658 tons at the end of November, a month on month increase of 23%, 25% higher than the average level in 2022 (527 tons)." "The net long position of fund managers also increased significantly, a month on month increase of 36%, to 449 tons, reflecting the positive sentiment of investors during this month's gold price rise."
According to ING's recent gold forecast for 2024, the bank predicts that both capital inflows and net long positions will continue to grow next year.
Ewa Manthy, commodities strategist at ING, said, "Looking ahead to 2024, we believe that investor interest in precious metals will resurge, and we expect a decrease in US interest rates to lead to a rise in gold prices and a recovery in net capital inflows."
Regarding the market position overview, Manthy stated that compared to 2019 and 2020, the overall position in 2023 appears to be neutral.
She said, "This indicates that speculators still have enough room to increase net long positions and further push up gold prices in 2024."
On December 7th at 13:12 Beijing time, spot gold was reported at $2026.25 per ounce
