Gold ETFs’ Increasing Volatility

    The spread of the pandemic and the global recession have triggered demand for gold as a storage for value. Unprecedented fiscal and monetary stimulus policies have exacerbated the shadow of inflation. Because of various high levels of uncertainty, people may continue to maintain a strong interest in gold and related assets. Total gold ETF holdings are approaching all-time highs. For example, the $79 billion SPDR Gold Shares has attracted nearly $20 billion in funding this year and has risen by about 30%.

    However, the price rally showed a weak sign as the economy reopened and less demand for safe-haven assets. The world's largest gold exchange-traded fund (ETF) is reversing the steady inflows. Gold's recent flattening after a surge in early August may be seen by traders as an opportunity to lock in some profits.

    The recent volatility in gold ETFs may also be due to market volatility and uncertainty about the Fed's policy adjustment. "There is growing uncertainty about the next steps, such as a sustained recovery or a more protracted setback, and there are divergent views on the inflation outlook," said David Perlman, ETF strategist at UBS Global Wealth Management.