ETF Securities Reports Biggest One-Day Gold Inflow Since Financial Crisis

etf-securitiesTyler Durden:  It never ceases to amaze how vastly different the investment styles of gold paper vs physical traders are: while we have documented previously how the latter tend to buy progressively more the lower the price (as traditional “buy low, buy more lower” investing would suggest), “investors” in gold paper-derivatives such as ETFs and ETPs are quite the opposite: in fact, they rarely buy until someone else is buying and generating momentum.

At that moment a reflexive buying spree is unleashed and paper buying begets even more paper buying.

Nowhere is this more evident than in today’s daily report of ETF Securities, where “inflows into gold ETPs of US$263mn on Friday 1st July were at their highest since inception.”


Demand for safe haven ETPs rise as uncertainty continues. Last week saw long gold, silver and long CHF recording strong inflows of US$433.5mn in total. Inflows into gold ETPs of US$263mn on Friday 1st  July were at their highest since inception. Gold and the Swiss Franc have historically been sought after for their safe haven traits allowing investors to hedge portfolios from downside risks. We expect demand for haven assets to remain elevated as uncertainty surrounding the UK’s leadership contest and its formal exit from the EU block remain high. While the Bank of England is preparing for more monetary policy easing, Deutsche Bank and Santander failed the US Federal Reserve stress test again, keeping investors nervous.


While dramatic in the aftermath of Brexit, the sudden influx of funds into paper-ETFs tracking gold is hardly new: in March we noted that “The Last Time Gold ETF Flows Were This Strong, The Fed Was Starting QE.”


Updating the gold fund inflow ETF chart shows the following:

It has gotten to the point where even Bloomberg, the majority of whose financial TV anchors and “pundits” abhor gold, was forced to report about the surge in ETF allocations.

Global gold holdings have expanded by more than 500 metric tons since bottoming in January in a signal of investors’ rising concern about slowing growth, a Federal Reserve that’s probably on hold and the ructions caused by Britain’s vote to quit the European Union. Assets in bullion-backed exchange-traded funds rose 6.6 tons to 1,959.1 tons on Friday, up from 1,458.1 tons on Jan. 6, according to data compiled by Bloomberg. Holdings increased 37 tons last week as investors reacted to the U.K.’s vote, and swelled in five months out of six in the first half.

Bullion prices climbed to the highest level in more than two years in June as investors absorbed the implications of the U.K. result, adding to a rally that’s been driven by the Fed’s hesitation in raising borrowing costs and the spread of negative rates in Europe and Japan. Banks including Goldman Sachs Group Inc. raised their outlooks for gold after the vote, while yields on 10- and 30-year U.S. Treasuries have touched record lows.

Actually the simple reason why everyone, including momentum-chasing algos, is once again rushing into gold is because not only are central banks about to unleash the latest and greatest round of currency devaluation, one which will require trillions more in FX “warfare” tools, but because with over 30% of all global debt trading in negative yields, gold’s 0% nominal yield is increasingly looking attractive to those who would rather not pay insolvent government for the privilege of lending them money.

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