Gold price: ETF inflows reach $100m a day

Back up for bullion. Image: Generation Grundeinkommen

According to a new report by the World Gold Council, holdings in global gold-backed ETFs rose 72 tonnes in January to reach 2,513 tonnes (80.8m troy ounces), hitting the highest levels in nearly six years.

In dollar terms net inflows in January equaled $3.1B with the value of gold held in ETF vaults reaching just shy of $107B by the end of the month, a 6% increase.

January was  the fourth consecutive month of net inflows, according to WGC data and thanks to a blockbuster December 2018, 185 tonnes or $8B was injected into the scores of funds listed around the world over the past four months.

More than $112.5B of gold was traded on average each day in 2018

The industry body says the inflows were driven by market uncertainty and a shift in sentiment that drove the price of gold 3.5% higher in January.

Fund flows strongly reversed the Q3 2018 declines with total inflows of 9% over the past four months.

North American gold investors led the buying with funds in the region, enjoying 53 tonnes or $2.2B of net inflows.

Low-cost ETFs, defined by the WGC as funds that charge less than 2% management fees, are becoming particularly popular adding 16 tonnes (worth roughly $700m) over the past six months, representing growth of 53%.

Gold price: ETF inflows reach $100m a day

As at 31 January 2019 Graphic World Gold Council. Data sources: Bloomberg, Company Filings, ICE Benchmark Administration, Shanghai Gold Exchange, World Gold Council

WGC notes that global gold trading volumes increased in January on par with 2018 averages. More than $112.5B of gold was traded on average each day in 2018 in over-the-counter transactions, futures exchanges and ETFs.

That compares to trading volumes of $23B in Dow Jones stocks and not far behind all the shares traded as part of the S&P 500 index ($124.7B).

Sentiment and positioning in Comex futures in New York is unclear as there has not been an update to positioning by large-scale speculators such as hedge funds since mid-December; a consequence of the US government shutdown.

The WGC says it believes “net longs increased yet remain below historical averages.“

A recent study by the WGC showed bearish positioning in futures historically precedes strong rallies in the price of gold.

Gold closed at $1,314.40 an ounce on the Comex market in New York on Wednesday, down on the day but up more than $130 an ounce from its summer lows.