August 7, 2020

Fund Investors Seek the Perceived Safety of Gold for the Week and Year

by Tom Roseen.

Investors were net redeemers of equity mutual fund and ETF assets for the Refinitiv Lipper fund-flows week ended Wednesday, August 5, 2020, withdrawing a net $7.2 billion. Despite the NASDAQ posting its thirty-first record close during the fund-flows week and a generally better-than-expected Q2 corporate earnings season, concerns over rising COVID-19 infection rates and continued Sino-American tensions have put investors back on their heels.

Year to date, equity funds have handed back a net $180.9 billion, with equity mutual fund investors redeeming $245.3 billion, while equity ETF investors have injected a net $64.4 billion. However, more than half of the YTD net inflows into equity ETFs can be attributed to rising interest in the safe-haven play of Commodities Precious Metals Funds. These funds have attracted just slightly less than $36 billion (its largest net inflows of any given full year going back to 2011, when Lipper began tracking weekly flows for this classification). Commodities Precious Metals Funds invest primarily in precious metal commodity-linked derivative instruments or the actual physical commodity.

The equity markets have clawed back most of their losses witnessed in March, with the S&P 500 Price Only Index down just 1.53% year to date (through August 5) and the NASDAQ up a whopping 22.58%. But that mega tech rally that has pushed the markets higher has also led to the consternation of many investors, quasi reminiscent of the dotcom meltdown in 2000. This, accompanied by coronavirus and China/America concerns, has had many investors moving toward safe-haven instruments.

While the 10-year Treasury yield closed near an all-time closing low and near-month gold prices rose to a record finish of more than $2,000, closing at $2,021 an ounce during the most recent fund-flows week as investor demand increased, Treasuries witnessed net outflows of $4.0 billion for the week. Meanwhile, Commodities Precious Metals Funds took in $2.5 billion, bringing their weekly net inflows winning streak to 20 consecutive weeks.

As might be expected, SPDR Gold Trust (GLD)—with approximately $83.5 billion under management—witnessed the lion’s share of net inflows into the Commodities Precious Metals ETF classification year to date, attracting some $21.2 billion thus far. iShares Gold Trust took in the next largest sum of net inflows (IAU, attracting some $7.6 billion YTD), followed by iShares Silver Trust (SLV, taking in $6.6 billion) and SPDR Gold MiniShares Trust (GLDM, drawing $1.7 billion).

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