Chinese Gold ETFs Hit Record High of 304 Tons in September

Chinese gold ETF holdings rose by 11 tons in September, marking the third consecutive monthly increase, to reach a record high of 304 tons at the end of the month, according to the China Gold Market Update released by the World Gold Council on October 15.

These funds recorded inflows in the third quarter of 27 billion yuan ($3.9 billion), increasing their holdings during the quarter by 27 tons and raising their assets under management (AUM) by 13%. However, total AUM declined by 2% in September to 276 billion yuan ($41 billion), as net inflows of 11 billion yuan ($1.6 billion) were offset by a decline in gold prices during the month.

The report attributed the demand for gold ETFs to a growing need for portfolio diversification amid sharp declines in domestic markets, a lower opportunity cost as government bond yields continued to fall, as well as support from official demand. This interest continued in early October amid ongoing weakness in stock markets.

This comes at a time when the Chinese central bank continues to strengthen its reserves, adding 23 tons in September in its largest monthly purchase since October 2023, bringing its holdings to 2,410 tons, accounting for 8.5% of total reserves. This official demand and growing investment demand are key factors supporting global gold prices, which matters to Arab investors tracking the impact of Chinese demand on the precious metal.

What Do These Terms Mean?

Gold ETFs: Investment funds traded on stock exchanges like equities that track the price of gold, allowing participation in the metal's price movements without physically holding it.

Assets Under Management (AUM): The total market value of funds managed by an investment fund on behalf of investors, fluctuating with inflows, outflows, and asset prices.

Opportunity Cost: The potential return foregone by an investor when choosing one asset over another, such as holding gold instead of interest-bearing bonds.

Official Demand: Purchases of precious metals made by central banks and governments, which are considered more stable than retail investor demand.

Foreign Exchange Reserves: Assets held by a central bank in foreign currencies and gold, used to support the local currency and settle external liabilities.