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Gold ETF Inflows Spike Ahead of the US Election

Passive fund investors have been looking at ETFs with exposure to safe haven assets such as gold in the run up to the US election, Morningstar data revealed

Karen Kwok 15 November, 2016 | 11:46AM

Magpie investors continue to crave gold bullion as a hedge against the global political uncertainty, data from Morningstar shows. The precious metals ETF sector recorded €818 million inflows in October alone, the biggest inflows across all sectors, according to Morningstar Direct.

ETFS Physical Gold (PHGP) was one of the five most clicked exchange-traded funds among Morningstar.co.uk readers in October ahead of the US Presidential Election. Investors also were researching ETFs that track indices that short the UK currency relative to the US dollar. ETFs Short GBP Long USD (SGB3) topped the most popular ETF list among Morningstar.co.uk in October – thanks no doubt to sterling falling considerably since the Brexit vote.

Gold Demand Accelerates

The BlackRock ETP Landscape report reflected a similar story to Morningstar Direct flows data, with gold products swelling €930 million over the course of the month.

Inflows into gold accelerated in October as investors sought out a safe haven ahead of political uncertainty such as the US election, Ursula Marchioni, chief strategist for iShares EMEA said. Inflows to the Morningstar Category precious metal sector have totalled €12.1 billion since January.

Alistair Hewitt, at the World Gold Council said that investors have looked to hedge against uncertainty stemming from geopolitical risk, including Brexit, the US Presidential race and the potential impact of elections in France and Germany next year.

“In addition, negative interest rates – a theme ever present this year - continued to underpin gold ETFs demand,” Hewitt added.

Before the presidential election the US central bank was widely expected to raise interest rates in December. However since Donald Trump’s White House victory, investors are predicting a radically different path for the US economy and the US interest rates, said Stephanie Flanders, chief market strategist for Europe at JP Morgan.

Adrian Ash, head of research at BullionVault, the online trading platform, added that if Trump proves to be the high-spending protectionist of his election campaign, gold prices look set to keep rising.

Frank Spiteri, head of distribution at ETF Securities said he expected the gold price to continue to rise next year in the face of more political uncertainties next year.

US Stocks Rally After a Trump Victory

US stocks rose with financials and healthcare stocks leading the rally after Trump won the presidential race last week. The FTSE 100 also rose – as both markets have solidly since the summer. Against that backdrop, it comes as no surprise ETF investors have been looking at ETFs that track the US and UK stock markets.

Vanguard FTSE All-World ETF (VWRL), Vanguard S&P 500 ETF (VUSA), Vanguard FTSE 100 ETF (VUKE) and iShares Core FTSE 100 ETF (ISF) topped the most clicked ETF list in October.

Vanguard S&P 500 ETF offers broad and diversified exposure to U.S. large-cap stocks by tracking the S&P 500, the most oft-cited proxy for the U.S. equity market, Morningstar passive analyst Monika Dutt said.

“With a low ongoing charge of 0.07% – one of the lowest among all S&P 500 index funds and ETFs – and a soundly constructed and reasonably representative benchmark, this fund is well positioned to continue its long streak of producing superior risk-adjusted returns relative its category peers,” Dutt added.

iShares Core FTSE 100 ETF, the UK’s oldest and largest FTSE 100 ETF charges super low fees at 0.07%, while Vanguard FTSE 100 ETF charges at 0.09%, director of passive research, Hortense Bioy said.

The Vanguard FTSE All-World ETF aims to replicate the FTSE All-World Index, which, with more than 3,000 constituents, covers 90%-95% of the global equity market capitalisation, Morningstar analyst Dimitar Boyadzhiev added.

The FTSE All-World allocates 7%-10% of its total value to emerging markets, making it a more comprehensive index than the popular MSCI World Index.

The most popular ETFs list by Morningstar.co.uk readers in October also featured iShares UK Property (IUKP), S&P UK Dividend Aristocrats ETF (UKDV), Vanguard FTSE All-World High Dividend Yield (VHYL) and iShares UK Dividend ETF (IUKD).

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
ETFS 3x Short GBP Long USD61.00 USD-0.17-
ETFS Physical Gold GBP9,574.45 GBX0.69-
iShares Core FTSE 100 Dist741.40 GBX0.09
iShares UK Dividend916.75 GBX-0.11
iShares UK Property601.56 GBX-0.11-
SPDR® S&P UK Dividend Aristocrats ETF12.92 GBP-0.19
Vanguard FTSE 100 ETF33.07 GBP-0.50
Vanguard FTSE All-World ETF GBP61.20 GBP-0.47
Vanguard FTSE All-World High Div Yld ETF GBP42.69 GBP-0.72
Vanguard S&P 500 ETF GBP36.25 GBP-0.83
About Author Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk