Commodities & Metals

More Proof That Gold Will Absorb Equity Dollars During Stock Market Uncertainty

It is no secret that investors were looking for some sort of safety in March. After all, there were growing fears of a trade war, ongoing issues in Korea, increased equity volatility and a decline in cryptocurrencies. Even interest rate pressures were there before the flight to quality. All this adds up to quite a story for gold investors.

Gold is often considered the ultimate safe haven during times of uncertainty. It remains debatable whether that should still be the case, but for a couple thousand years or more of history gold has defined wealth and been a store of value.

24/7 Wall St. just saw how the equity outflows were quite high in the second half of March, and it looks like gold-backed exchange traded funds (ETFs) and similar instruments were the beneficiaries. RBC Capital Markets recently took a positive stance on gold during uncertain times in the form of its top gold-mining stock picks.

The World Gold Council has released its March inflows and outflows data on gold-backed funds, as well as the year-to-date figures. In prior reports, the council expressed its reasons why cryptocurrencies are not a real substitution for gold.

It turns out that global gold-backed ETFs added a total of 22.5 tonnes of gold during March. This was an increase to 2,415 tonnes, worth some $102.8 billion. The council’s preliminary statement said:

Inflows in the US and China reflect broader market uncertainty related in part to geopolitical risks such as global trade tensions in March – more broadly, North American-listed funds have accounted for 85% of total net inflows so far this year… A weaker US dollar and stock market performance also drove US investors to gold, which has been one of the year’s best performing assets, having rallied 2.5% through Q1.

More specifically, North American funds accounted for 85% of total net inflows this year, at about 27.9 tonnes worth $1.2 billion. The SPDR Gold Shares (NYSE: GLD) and the iShares Gold Trust (NYSE: IAU) were the primary drivers of North American and global inflows. In March alone, these accumulated 15.1 tonnes ($642 million, 1.8% of assets) and 5.4 tonnes ($230 million, or 2% of assets), respectively.

There was a bit of a different move in Europe, with outflows of 1.2 tonnes. The council’s March notes showed that European outflows were mostly led by U.K.-listed gold-back funds and that those outflows were driven by a stronger pound sterling and higher certainty that an agreement with Europe on Brexit will be met.

A recovery in the stock market from Wednesday’s lows has taken some of the strength out of gold. On Thursday morning, gold was last seen down almost 0.4% at $1,325 per ounce. That price looked as though it was ready to hit $1,350 per ounce in the wee hours of Wednesday morning.

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