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Last month, gold exchange-traded products (ETPs) took in a record $11.3 billion, according to Blackrock, as investors fled European equities while Russia’s Ukraine war raged on (see related story in this issue).
Investments grew fivefold from February’s amount, eclipsing July 2020’s record monthly inflow of $9.4 billion.
The surge drove gold’s price to $1,947 on 10 April, nearing the neighborhood of its all-time high of $2,074 in August 2020.
Total assets in gold are now worth just 1.8 percent less than the record total struck in October 2020, the Financial Times reported.
In contrast, outflows from European stocks set a record of $5.5 billion in March, subtracting almost the entire $6 billion invested in January, which was the strongest wave of buying in the market since 2015.
“We have now had eight consecutive weeks of European equity selling, the longest period since October 2020,” Karim Chedid, chief strategist for Blackrock’s iShares operations in Africa, Europe, and the Middle East, told the FT.
As a result, “Europe is at a bigger risk of stagflation than other developed market regions,” he said. “It’s more vulnerable to the energy shock” created by the Ukraine war.
Inflation and slowing growth are appearing in the price of European stocks, he noted.
“We need to see a peak in inflation so investors can know what they’re dealing with,” he said. “Before we reach that peak, it’s hard to see sentiment significantly turning around in Europe.”
In contrast, U.K. stocks took in a net $607 million in March, the most since last April.
“The FTSE 100 [Britain’s key stock index] is the only developed market country index that is up on the year,” Chedid said. The FTSE had gained 2.5 percent as of 8 April.
“This is driven by its tilt toward cyclicals, especially energy stocks,” he said, adding that valuations are “looking even more attractive than at the beginning of the year.”
Globally, exchange-traded funds focused on the financial industry witnessed a $7-billion net outflow of cash in March, following January’s record $11-billion inflow.
“We see a structural upturn in the intake of gold ETPs,” Chedid said.
When inflation rises to or beyond 7 percent, there is a close correlation between equities’ outflows and increased investment in gold, he noted.