Asia gold ETFs are breaking the trend and attracting strong inflows

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Exchange traded gold funds continued to see strong inflows in Asia this year as many investors hedge against worries of widespread inflation and guard against uncertainties surrounding the course of the pandemic and economic recovery.

As of the end of June, Asia-based gold ETFs had net inflows of $ 1.6 billion, making them the only region to see net inflows. Gold ETFs based in China, India and Hong Kong were the main drivers of the inflows.

In contrast, there were significant outflows from the funds in the US and Europe, with total net outflows over the same period reaching $ 8.5 billion and $ 3.6 billion, respectively, according to Morningstar data.

China accounted for the largest share of the cash flow in Asian gold ETFs, with 10 funds contributing more than $ 651 million in assets under management in the first half of 2021.

This article was previously published by Ignites Asia, a title owned by the FT Group.

Investors in Hong Kong and India also invested money in gold ETFs. While eleven Indian-domiciled funds recorded net inflows of $ 371 million, four gold ETFs in Hong Kong recorded net inflows of $ 270 million.

The strong inflows come after a similarly strong performance last year when Asia-based gold ETFs recorded inflows of $ 3.4 billion, of which India contributed $ 898 million, China $ 860 million and Japan contributed $ 434 million .

Fears of a return to high inflation have risen recently as countries open their economies and spending resume after the pandemic. According to the International Monetary Fund, the global inflation rate rose from 3.2 percent in 2020 to 3.5 percent in 2021.

Robin Tsui, Hong Kong-based Asia-Pacific gold strategist for State Street’s SPDR ETFs, said the continued inflows into Asia-listed gold ETFs in 2020 were due to several factors.

These include the global easing of monetary policy, the weakness of the US dollar, the uncertainty surrounding Covid-19 and the decline in real returns, all of which benefited gold prices and fueled demand for gold ETFs.

The price of gold rose 28 percent in the first half of 2020 before plummeting from its high in August. In February of this year the price began to rise again. It stood at $ 1,815 an ounce on July 6, down from $ 1,522 an ounce in early 2021.

Leena Dagade, associate director of Singapore-based Cerulli, said investors were drawn to gold ETFs because of their “safe haven appeal” during last year’s market volatility.

She said investors “still allocate some of their assets to gold because of its role in uncertain times and as a portfolio diversification tool”.

Tsui said the outlook for Asian gold ETFs was still “good”.

He said that Asian investors’ assets had continued to grow and that intermediaries and institutional investors alike were more interested in seeing gold investing as part of a strategic approach to asset allocation.

“Gold remains attractive to Asian investors when compared to other regions,” he said.

Central banks around the world expect gold reserves to grow over the next 12 months, with most citing “uncertainty about economic recovery from the Covid-19 pandemic” as the reason for buying gold, according to a survey conducted by the World Gold Council .

Ignites Asia is a news service for professionals in the wealth management industry, published by FT Specialist. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at ignitesasia.com

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