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Strong run for yellow metal as Europe investors pile into gold ETPs – and emerging markets

EDINBURGH — Gold ETPs (Exchange Traded Products) are attracting investors in Europe, though elsewhere there is less excitement about the yellow metal. Figures from BlackRock’s iShares show that there have been strong inflows into gold ETPs while there have been net outflows from US-domiciled ETPs. Also noteworthy is that Europe investors are piling into emerging market equity Exchange Traded Funds. iShares analysts note that May was a strong month for Europe’s ETF/ETP industry. – Jackie Cameron

From iShares (BlackRock)

Gold ETPs domiciled in Europe attracted $0.6B in May, continuing a strong period for the yellow metal: there have been inflows every month this year and a cumulative $2.8B of inflows.

GOLD ETP

  • There is a clear juxtaposition in views between US and European investors when it comes to gold, however. While European ETPs are enjoying some time in the sun, in 3 out of five months this year there have been net outflows from US domiciled ETPs.
  • The divergence between US and European investors on gold is not in keeping with recent history. In the 24 months prior to December 2016, there were only 5 months where European and US domiciled flows moved in opposite directions. With investors concerned about crowding in consensus trades, Gold ETPs show that there are areas in the markets that continue to divide opinion.
  • The $11.0B that flowed into European-domiciled ETPs in May represents not only the largest net monthly inflow of the year, it is the biggest May inflow on record and the third-largest single month of net inflows ever.
  • Across asset classes, $44.7B has flowed into European-domiciled ETPs YTD, more than double the $18.1B average YTD flow recorded at end May from 2010 to 2016.
  • Equities (+$6.8B) continue to dominate over fixed income (+$3.1B), recording significantly larger inflows for the eighth month in a row. Commodity ETP flows (+$1.2B) were predominantly due to gold.
  • Another theme that continues from last month is strength in EM equities. May was the fourth month in a row of net inflows to EM equity ETFs and the largest monthly inflow since August 2016.Emerging markets
  • Recent inflows are a reversal of the three months of net outflows that came following the US election where President Trump’s protectionist rhetoric appeared to spook many ETF investors.
  • 2017 has been a very strong period for EM ETFs across all domiciles. The current five straight months of inflows has been the best monthly run since January 2013 when a run of 7 straight months came to an end. Investors have seemingly focused on improving EM fundamentals rather than the protectionist rhetoric that characterised the US election campaign when determining their asset allocations.
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