Hedge funds slash bullish wagers on gold over Trump election win
Hedge funds and other large speculators boosted net-long positions by 11% to 197,362 as of Nov. 12, the lowest in 14 weeks.
Global gold-backed exchange-traded funds (ETFs) had $23 billion, or 298 tonnes of net inflows in Q1 2020 – the highest quarterly amount ever and the largest tonnage additions since 2016, the World Gold Council said in its latest report.
During the past year, gold ETFs added 659 tonnes, the highest on a rolling annual basis since the financial crisis, with assets under management (AUM) growing 57% over the same period.
For the month of March, gold ETFs added 151 tonnes for a net inflow of $8.1 billion, boosting holdings to a new all-time high of 3,185 tonnes.
Trading volumes and AUM reached record highs as gold volatility increased to levels last seen during the financial crisis, yet gold price performance was mostly flat in US dollars for the month, the Council reported.
While uncertainty around the short- and long-term economic impacts of covid-19 continue to drive sharp volatility across many assets, encouraging inflows into safe-havens like US treasuries and gold, gold ETFs listed in all regions experienced strong inflows during the month.
“Gold prices denominated in many other currencies, however, continued to reach all-time highs although the price in US dollars remained 15% below its 2011 high. This highlights a continued trend of growth in gold ETFs outside of the US over the past few years,” the WGC said.
European funds led regional inflows, growing by 84 tonnes ($4.4 billion, 5.8% AUM), while North American funds added 57 tonnes ($3.2 billion, 4% AUM). Asian funds, primarily in China, also finished the month with strong inflows, adding 4.9 tonnes ($309 million, 6.4% AUM).
Looking ahead, WGC analysts said recent drivers of investment demand are expected to continue, widespread market uncertainty and the improved opportunity cost of holding gold as yields move lower.
“With the Fed taking interest rates to zero for the foreseeable future, gold could do well as it tends to outperform during easing cycles. Additionally, multi-trillion dollar fiscal stimulus policies to combat the economic impact of covid-19 could prove inflationary – a development that could support gold prices in the long run,” the WGC said.
