A Mixed February for Gold ETF Assets

MarketsETF Trends

This article was originally published on ETFTrends.com.

Amid increasing equity market volatility last month that sent the U.S. dollar surging, global gold exchange traded products saw mixed February flows.

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“Gold-backed ETFs collectively held 2,393.4t (US$101.4bn) at the end of February after losing 5.1t (US$146mn) during the month,” according to the World Gold Council (WGC).

Gold has enjoyed greater demand in a low interest-rate environment as the hard asset becomes more attractive to investors compared to yield-bearing assets. However, traders lose interest in gold when rates rise since the bullion does not produce a yield. Interest rates remain low in many developed markets and some emerging markets have been rapidly lowering borrowing costs this year.

The SPDR Gold Shares (NYSEArca: GLD) and the iShares Gold Trust (NYSEArca: IAU) are the largest gold ETFs trading in the U.S.

“Asian and European funds have reversed their 2017 trends,” said the WGC. “Assets in Asian-listed funds grew by 10% through February. European-listed funds have had two consecutive months of net outflows.”

Over the past 20 years, gold has outperformed alternative and traditional assets, such as developed market stocks, hedge funds, developed markets debt, global real estate investments and the broader commodities complex, according to WGC data.

The iShares Gold Trust accounted for 47% of net global gold ETF inflows through February, but investors did pull assets from North America gold funds last month.

Inflation could serve as a catalyst for the yellow metal and for gold-related ETFs. By some metrics, the Fed has under-estimated U.S. inflation, which could prove beneficial to gold because the yellow metal is historically a popular inflation fighter.

On a global basis, gold ETFs have $101.4 billion in combined assets under management with funds listed in North America and Europe combining for $95.8 billion of that total, according to WGC data. Year-to-date, investors have pulled $120 million from GLD, but have added $931.6 million to IAU.

For more information on the gold market, visit our gold category.

Tom Lydon’s clients own shares of GLD.

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