by Peter Schiff, Schiff Gold:
The flow of metal out of gold-backed ETFs slowed significantly in November, with North American ETFs charting gold inflows for the first time in five months.
A total of 9 tons of gold flowed out of ETFs globally, but total assets under management increased by 2% thanks to the rise in the price of gold.
Globally, ETFs hold 3,236 tons of gold valued at $212 billion as of Dec. 1.
North American-based ETFs recorded a 10.4-ton increase in their gold holdings. According to the World Gold Council, the fact that the Federal Reserve kept interest rates unchanged for the consecutive meeting brought forward investors’ expectations for the tightening cycle ending.
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However, most of the support for both the price and ETF flows came from heightened geopolitical risk early in the month and investor positioning. The gold price rally ahead of the expiry date of major gold ETF options on 17 November also brought notable inflows.”
European funds continued to experience significant outflows of gold in November. European funds shed 20.1 tons of gold. It was the sixth straight month of outflows. European yields were at their decade-highs, creating headwinds for gold. Local currency strength against the dollar also suppressed the demand for gold in the eurozone.
Asian-based ETFs recorded a 0.6-ton increase in gold holdings, with inflows into Japanese and Indian funds outweighing outflows from Chinese ETFs.
To date, Asia is the only region with positive inflows for the year.
Global gold market trading volumes averaged $174 billion per day, an increase of 3% month-on-month. While the trading activity of gold ETFs dropped significantly (-26%) in November, the OTC market barely changed. Volumes of other exchange-traded products rose by 10% – contributed mainly by COMEX.
Net long positioning on COMEX rose further, totaling 658 tons at the end of November. That was a 23% increase month-on-month and 25% above the 2022 average.
Inflows of gold into ETFs are significant in their effect on the world gold market, pushing overall demand higher.
ETFs are backed by physical gold held by the issuer and are traded on the market like stocks. They allow investors to play gold without having to buy full ounces of gold at spot price. Since their purchase is just a number in a computer, they can trade their investment into another stock or cash pretty much whenever they want, even multiple times on the same day. Many speculative investors appreciate this liquidity.