Gold ETFs record strongest quarter on record as investors rush for safety

By the end of Q3, global gold ETFs’ total assets under management (AUM) reached US$472bn (+23% q/q) reaching another record high. Holdings rose 6% q/q to 3,838t, only 2% shy of the peak of 3,929t, recorded in the first week of November 2020.

Regional overview

North American funds added US$10.6bn in September, the region’s fourth consecutive monthly inflow. Strength in demand throughout the month and the quarter were driven by similar factors:

• Ongoing trade, policy, and geopolitical risks continue to persist with no clear signs of abatement
• Dollar weakness persisted and now faces further pressure from the government shutdown. However, the dollar looks oversold technically and positionally, risking a short squeeze
• Expectations of lower yields ahead, as the Fed delivered a 25bps cut during the month, also helped. The market is now pricing in one to two cuts by year-end
• With the gold price repeatedly breaking records, investor interest rose.

Meanwhile, equities have reached new highs, and despite their recent resilience to macro data surprises, we think investors may be positioning themselves for a pullback. This has likely helped support gold demand, as investors look to add safe-haven assets.

European funds have now logged five straight months of inflows, adding US$4.4bn in September. This was the region’s third strongest month ever in terms of gold ETF inflows. The UK, Switzerland, and Germany again led activity.

We believe the strong gold price rally has been a key contributor for gold ETF demand across the region. The ECB and BoE kept rates unchanged in the month, while inflation rose, lowering real rates and increasing policy uncertainty. 

Flows reflected both protection and momentum as investors sought a purchasing-power hedge and leaned into the breakout. Meanwhile, continued stagflation fears in the UK could be another key factor attracting gold ETF inflows.

We attribute this to favourable local currency dynamics and increased investment demand as investors look for safe havens amid weaker domestic equities and persistent geopolitical and trade risk.

Funds in other regions recorded a modest inflow of US$175mn in September, yet their Q3 flows remained flat at US$28mn. Australia led inflows (US$182mn) in the month, but these were partially offset by South African outflows (US$65mn).

Volumes rally with gold price

Exchanges led the way increasing 66% m/m to an average of US$188bn/day – with trading at both COMEX (+58%) and Shanghai Futures Exchange (+84%) driving the bulk of the flows.

Total net longs in COMEX gold rose 23% during the month, concluding at 806t. 6 Money manager net longs rose 7% to 493t. Other net longs drove a notable share of demand, increasing 33% to 313t and reaching their highest level since 13 September 2022.

This increase in demand was largely driven by factors similar to those we flagged earlier, such as dollar hedging, inflation concerns, geopolitical tensions, and ongoing US government risks, including the shutdown in early October.

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