Gold ETFs See Record Inflows in 2020

Gold had a strong year with 25% returns, and gold ETF inflows followed, reaching a new record high of $47.9 billion in 2020.

Gold-backed and gold ETFs have increasingly become a vital part of the gold investment market, making up around two-thirds of global net inflows for investment demand in the precious metal.

While gold set new all-time highs around $2,075/oz in 2020, gold ETF inflows ($47.5B) almost doubled the previous record-year of inflows (2016, $24.1B), and eclipsed 2013’s record year of outflows ($-41.6B).

Gold futures also saw increased participation in 2020, with aggregate open interest reaching yearly record-highs of $120.9B as investors and traders sought gold exposure.

North American Funds Represent Most Gold ETF Inflows

In terms of regionality, North American funds accounted for almost two-thirds of global net inflows from Q1-Q3’2020, reaching a total inflow of $31.9B for the year.

SPDR Gold Shares (GLD), the first U.S. gold ETF launched in 2004, made up the majority of North American inflows at $15.4B. Interestingly, this one ETF alone eclipsed Europe’s entire inflows for 2020 ($13.3B).

While Gold ETFs in Asia only reached $1.9B last year, their holdings saw the greatest percentage increase of all regions (49%) with seven new Chinese funds listed in 2020.

Gold ETFs are Driving Gold Investment Demand

Although flows turned negative in November ($-6.8B) and December ($-2.2B) of 2020, Gold ETF flows have returned positive for the first couple of weeks of 2021, with a $2.1B inflow as of Jan 15, 2021.

This return to positive ETF flows came as gold fell more than 5% from its $1,950 highs reached in early January. This could be a sign of gold ETF investors buying the dip, as gold potentially begins to turn upwards for the final two weeks of January.

Since gold ETFs make up such a large part of gold investment demand, keeping an eye on ETF flows can offer insight into where the precious metal might be headed.