Indian gold ETF holdings hit highest level since September 2013: WGC

NEW DELHI: Holdings in Indian gold exchange-traded funds (ETFs) hit their highest since September 2013, driven by heightened volatility in stock markets and a correction in domestic gold prices, the World Gold Council (WGC) said in a report.

Indian gold ETFs witnessed net inflows worth $68.3 million during September, taking year-to-date flows to $433 million.

Global gold-backed ETFs saw net outflows of 15.2 tonnes or worth $830 million during September as prices fell on back of rising bond yields, a stronger dollar, and a reduction in COMEX managed money net long positions. Year-to-date, global gold ETFs have seen outflows worth $8.3 billion (-156 tonnes).

Meanwhile, gold ended about 4% lower at $1,743 per ounce in September.

Outflows in Europe and North America were partially offset by inflows in Asia, as global gold ETF holdings fell to 3,592 tonnes or $201 billion worth during the month, the lowest tonnage level since April.

“European gold ETFs were the primary driver of September’s outflows, followed by North American funds. Larger funds in the UK and Germany led outflows within Europe, which as a whole lost 11.5 tonnes (-$640 million). North America had collective outflows of 6.6 tonnes (-$349 million) attributed mostly to losses from large US funds,” WGC said in a report.

Outflows from both the regions stemmed from central banks announcing policy tightening going forward.

In contrast, Asian-listed funds ended the quarter positive with inflows of 2.4 tonnes ($135mn), supported again by weakness in Chinese equities in late September, rocked by the Evergrande liquidity crisis.

In Asia, Huaan Yifu Gold ETF in China had inflows of 1.1 tonnes ($58 million), while in India, Nippon India Gold added 0.5 tonnes ($31 million).

According to WGC, monetary policy shifts by global central banks may challenge gold going ahead.

Following months of speculation, the US Federal Reserve finally signaled that it was almost ready to begin tapering asset purchases – perhaps as soon as November. The imminent reduction in asset purchases, and likely subsequent interest rate hikes, can be a headwind for gold.

“Gold’s performance will likely remain choppy as the markets continue to assess the potential impact of economic indicators on central bank policy. The need for portfolio protection and diversification is ever-present, but the more optimistic economic outlook could weigh on gold investment and sentiment,” WGC said.

In India, WGC said, gold demand remained firm in September, having strengthened in August, supported by wedding-related purchases and the release of pent-up demand following lower local gold prices.