Gold ETFs Record $31B Inflows Despite 8.5% Price Drop

Investors poured a record amount of money into gold-backed exchange-traded funds last quarter even as bullion suffered its sharpest monthly drop of the year, according to the World Gold Council. The divergence underscores an unusual split between ETF investors and futures traders.

Global gold ETFs attracted $10 billion in September, lifting third-quarter inflows to a record $31 billion, the council said. Holdings increased by 67 tonnes to a record 4,256 tonnes despite the gold price falling 8.5% during the month to finish September at $4,176 per ounce.

Futures Selling Drives Price Drop

The divergence appears to have been driven largely by futures selling rather than investors abandoning gold, according to BMO Capital Markets and the council. Comex managed-money positions fell by the equivalent of 84 tonnes in September while spread positions dropped by another 156 tonnes. The futures liquidation more than offset strong ETF demand and helped push bullion lower as U.S. Treasury yields and the dollar strengthened.

The U.S. 10-year Treasury yield climbed 53 basis points during September to 5.3%, while the U.S. dollar index gained 2%. Gold nevertheless continued to attract ETF money, with $1.4 billion flowing into the funds last week, BMO reported.

Regional Inflows

North American ETFs attracted $4 billion in September, taking third-quarter inflows to $12 billion. European funds brought in $3.6 billion during the month and a record $14 billion during the quarter. U.K.-listed funds attracted $7.5 billion during the quarter, their strongest three months on record, drawing inflows during 12 of the 13 weeks through September 25.

Key facts

• Global gold ETFs attracted $10 billion in September, pushing third-quarter inflows to a record $31 billion.
• Gold holdings increased by 67 tonnes to a record 4,256 tonnes.
• The gold price fell 8.5% in September to finish the month at $4,176 per ounce.
• Comex managed-money positions fell by the equivalent of 84 tonnes in September.
• U.S. 10-year Treasury yield climbed 53 basis points to 5.3% in September.