Global gold exchange traded funds (ETFs) have experienced significant inflows for the sixth straight month in October 2024, with an addition of USD$4.3 billion.
The World Gold Council released data on Friday showing a robust performance in gold-backed ETFs over the past year.
North American funds saw steady inflows, with October alone bringing in USD$2.7 billion. This surge came as investors reacted to uncertainties around the U.S. presidential election and rising geopolitical tensions, which traditionally drive up gold’s appeal as a safe-haven asset.
In Europe, however, the trend diverged, with funds experiencing outflows that totalled USD$563 million in October. Rebounding yields increased the opportunity cost of holding gold, leading to this shift. Meanwhile, in Asia, investments continued to flow into funds, particularly in China, adding USD 2.1 billion in October. High local gold prices and market volatility further fuelled this growth.
This influx of investments pushed the collective holdings of global gold ETFs to 3,244 tonnes, while assets under management (AUM) reached a month-end record of USD$286 billion in October, driven by both the inflows and record-high gold prices.
The gold price has continued to rise, reaching new highs due to various global economic and political factors, which have boosted demand for gold ETFs.
Investor sentiment among western investors has also shifted significantly; in July, gold ETFs posted their best performance since April 2022, largely driven by expectations of monetary policy changes from the U.S. Federal Reserve.
In emerging markets, gold ETF holdings have surged, with countries like India doubling their holdings over the past four years to reach 54.5 tonnes, reflecting a growing interest in gold as an investment in these regions.
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Geopolitical issues have increased demand for gold ETFs
The WGC’s data indicates that investors continue to use gold ETFs as a vital tool for portfolio diversification amid economic uncertainties and geopolitical risks.
The report indicated that uncertainty surrounding the U.S. presidential election boosted North American demand for gold. Furthermore, the military escalation in the Middle East, along with reports of North Korean soldiers joining Russian forces in the Ukraine conflict, likely further increased demand for gold ETFs.
These consistent inflows demonstrate gold’s lasting appeal as a hedge against inflation and currency fluctuations. However, performance varies widely by region, shaped by local economic conditions, currency strength, and investor behaviour.
The heightened demand for gold amid global uncertainties positively impacts gold mining companies like Calibre Mining Corp (TSE: CXB) (OTCMKTS: CXBMF), Barrick Gold Corp (TSE: ABX) (NYSE: GOLD), and Newmont Corporation (TSE: NGT) (NYSE: NEM).
Rising gold prices, driven by geopolitical risks and economic instability, increase revenue potential for these companies, enabling higher profitability and possibly supporting expansion projects. For instance, Calibre Mining, which has operations in regions sensitive to both market and political fluctuations, may benefit from stronger gold prices, boosting their output value and financial performance.
Similarly, Barrick Gold and Newmont, as two of the largest gold miners, stand to benefit from both increased demand for gold and rising prices, allowing them to fund exploration projects, improve efficiency, and potentially increase dividends for shareholders.
However, the geopolitical volatility that supports gold prices can also lead to supply chain disruptions, regulatory challenges, and cost inflation, all of which can offset some gains.
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