[NEW YORK] Chinese investors funnelled a record amount of cash into gold-backed exchange-traded funds (ETFs) last week, drawn by the safety of the asset as combative trade war rhetoric from the world’s biggest economies shakes global markets.
Inflows to four major onshore gold ETFs, including Huaan Yifu Gold ETF, hit a record of 7.6 billion yuan (S$1.4 billion) last week, according to Bloomberg’s calculations, with strong inflows continuing this week. The surge came after steep tariffs announced by US President Donald Trump wiped trillions off global equities and stoked fears of a recession.
China has vowed to “fight to the end” after Trump vowed to slap an additional 50 per cent duties on the country unless it withdraws its tit-for-tat retaliation against earlier US levies.
Gold is traditionally bought as jewellery for its cultural significance in China, but investors have increasingly favoured the precious metal as a hedge against uncertainty. The majority of recent inflows has been driven by retail investors, two major ETF providers said on the condition of anonymity.
While Chinese gold ETFs are relatively small compared with global counterparts, investors are adding to their holdings at an increasing rate. The year-to-date additions are already four-fifths of that last year.
“If this continues, China ETFs may well begin to rival developed-market ETFs in their impact,” said Michael Hsueh, precious metal analyst at Deutsche Bank.
Bullion has enjoyed a blistering rally this year off the back of trade and geopolitical tensions. It has set successive records and lured cash from ETFs and central banks alike. While prices retreated slightly amid a global sell-off to cover losses elsewhere, gold is still up more than 13 per cent this year and has more room to rise, according to industry predictions.
“When there is macro uncertainty, funds flow into gold and bonds to avert risks,” said Yu Yingdong, general manager of Shenzhen Cowin Asset Management. “To some extent, this diverts funds that might have otherwise gone into equities.”
Around 5.3 billion yuan flowed out of Chinese equity ETFs in March, according to data compiled by Bloomberg. BLOOMBERG
