SMM News: precious metal ETF is an important investment way for market investors to participate in the precious metal market. It is favored by investors for its convenient transaction, low transaction costs and good liquidity. At the same time, the public data of precious metals ETF provides a good observation channel for us to analyze the price trend of precious metals.
There is still much room for development in China's gold ETF market.
On March 28th, the World Gold Council launched the world's first gold ETF--Gold Bullion Securities, and listed on the Australian Stock Exchange.
On November 18, 2004, the largest and most liquid gold ETF--SPDR Gold Trust landed in the United States and traded on NASDAQ. The fund is launched by World Gold Trust Services, a subsidiary of the World Gold Council, and the trustee is the Bank of New York Mellon, which is responsible for calculating daily net asset value and other day-to-day management. The custodian of the gold is the US branch of HSBC, and gold is sold only when redemption and operating rates are paid. Because SPDR is the most popular gold ETF, in the world, its product feature has become the standard of non-leveraged gold ETF.
Silver ETF fund is a kind of financial derivative product which is based on silver and tracks the fluctuation of spot silver price. Large silver producers sell physical silver to fund companies on consignment, and then fund companies rely on this physical silver to publicly issue fund shares on the exchange and sell them to all kinds of investors. Commercial banks act as fund custodian banks and physical custodian banks respectively, and investors can freely redeem them during the existence of the fund. Silver ETF is listed on the stock exchange, and investors can trade silver ETF, as easily as stocks. Low transaction cost is one of the major advantages of Silver ETF. IShares Silver Trust (SLV) is currently the world's largest silver ETF, silver-based assets, designed to track spot silver price trends, belongs to commodity ETF, physical ETF.
In June 2013, China's first gold ETF (Huaan Gold ETF) began to be issued. After years of development, there are four gold ETF, in China: Hua'an Gold ETF, Boshi Gold ETF, Cathay Pacific Gold ETF, Yi Fangda Gold ETF, all take physical gold as the investment target.
From the scale of physical gold positions, the scale of domestic gold ETF is still small. As of April 10, 2020, the total share of domestic four gold ETF is 4.782 billion, and the market value is only 18.65 billion yuan, which is less than 6% of the market value of SPDR Gold Trust positions. Therefore, China's gold market is weak in the global gold pricing system, and it also shows that China's gold ETF market still has more room for development.
There is a close relationship between precious metal prices and ETF positions.
From the perspective of historical statistics, there is a close relationship between precious metal prices and precious metal ETF positions. The trend between the global gold ETF position and the gold price is obviously consistent. In the golden bull market in 2004 and 2012, the gold ETF position size continued to rise with the gold price; and after 2012, the gold ETF position also gradually declined with the gold price. Gold ETF positions have grown steadily since 2015 as gold prices re-entered the upward path, and are now close to the peak of the bull market in 2012. In fact, the positive correlation between the two is as high as 0.79, and the trend is basically the same. In addition, there is no obvious lead or lag between gold prices and ETF positions.
At the same time, the relationship between silver price and silver ETF position is not very close. Especially after the 2012 bull market in precious metals, global silver ETF positions remained high and fluctuated, while silver prices fell from $50 / oz to about $10 / oz. The positive correlation between the two is only 0.38, which is much less than the correlation between gold price and gold ETF position.
The above is the relationship between precious metal ETF and precious metal prices from the long-term trend. In fact, using 100 trading days as a statistical window, we can find that there is a highly positive correlation between gold prices and gold ETF positions in the short term. On the contrary, the correlation between price and ETF position is not very obvious, and the probability of positive correlation and negative correlation is basically equal.
From the long-term and short-term analysis results, gold ETF as a channel to observe the price of gold is more reliable than silver.
There is an obvious logical relationship between gold price and gold ETF position. The absolute level of gold ETF positions and the relative changes of gold positions can objectively reflect the views of market investors on the future of gold. From the perspective of investment on the left side of the market, when the market environment is conducive to the rise of precious metals, some investors begin to apply for gold ETF share in foresight, and the position size of gold ETF increases, which leads to the rise of gold price, which is often synchronized between the two. From the perspective of investment on the right side of the market, when some investors observed the rise in gold prices, for the motivation of investment or speculation, they began to enter the market to purchase gold ETF for investment, resulting in a further increase in the size of ETF positions. Therefore, the gold price and gold ETF position size reflect the characteristics of convergence in the short-term, medium-term and long-term.
Global ETF positions in precious metals hit an all-time high
After the international gold price bottomed out and rebounded in 2015, gold started a nearly five-year "bull market". Based on the bottom $1045.4 per ounce of COMEX gold in 2015, by the close of June 3, 2020, COMEX gold prices had risen 62.9 per cent, with a compound annual return of 10.25 per cent. Over the same period, COMEX silver prices rose 31.82%, with an annual compound rate of return of 5.68%. Corresponding positions in SPDR gold ETF and SLV silver ETF increased by 77.42% and 48.27% respectively.
Since 2019, due to the slowdown in global economic growth, the global central banks, led by the Federal Reserve, have generally adopted loose monetary policies to stimulate the economy. At the same time, the global trade pattern has undergone profound changes, and the continuing trade friction between China and the United States has led to a rise in market risk aversion. In this environment, the enthusiasm for investment in precious metals is high, and the price of precious metals is accelerating upward, along with the rising level of ETF positions in precious metals.
In 2020, the new crown pneumonia epidemic raged around the world, accelerating the pace of global economic decline, and the safe haven assets represented by gold are more favored by the market. Statistics from the World Gold Council show that global gold ETF holdings increased by 623 tons from January to May 2020, exceeding the increase in positions in any year since records began. In particular, despite a sharp drop in trading volume in other asset classes, gold trading volume increased in May, climbing from $140 billion to $164 billion.
The divergence between gold price and ETF position is not sustainable.
Since April 2020, there has been a significant divergence between SPDR positions and gold prices. On the one hand, COMEX gold prices have fluctuated widely between 1680 and 1760 USD / oz since mid-April; on the other hand, SPDR gold ETF positions have risen steadily. As of June 3, 2020, SPDR gold ETF positions reached 1133.37 tons, close to the peak of the 2012 gold bull market. There is a rare out of sync between the two. But the corresponding silver behaves normally. As SLV silver ETF positions continue to increase significantly, silver prices have recently risen significantly, far better than gold, and the gold-silver ratio has fallen back to around 94 from a high of 124 in mid-March.
We believe that the divergence between gold prices and gold ETF positions is not sustainable for two main reasons:
First, SPDR gold ETF investment is a spot investment, investors must first buy the corresponding spot gold, and thus apply for ETF share from SPDR, but do not allow direct cash purchase ETF, this process is relatively cumbersome, generally hold positions for a long time. Therefore, the increase in SPDR gold ETF positions more reflects the willingness of investors to be bullish on medium-and long-term gold.
Second, the recent hesitation in gold prices is mainly due to the increase in short-term risk appetite of the market. Since April, Europe and the United States and other countries have promoted the process of resuming work and production one after another. under the background of extremely loose money and extremely abundant liquidity, the stock markets of Europe and the United States and other countries have risen continuously, recovered their previous losses, and maintained a high level of market risk appetite. In addition, the rate of expansion of the Fed's balance sheet has slowed marginally recently, and the amount of treasury bond purchases per day has fallen from $50 billion in the previous period to $4.5 billion in recent days. Therefore, in the short term, the upward momentum of precious metal prices is insufficient, so it presents the current pattern of wide oscillation.
In essence, this epidemic has undoubtedly accelerated the pace of economic decline in countries such as Europe and the United States. As the economic marginal utility of resuming work and production in Europe and the United States gradually reaches the inflection point, the economic downward pressure in Europe and the United States and other countries may reappear, and then the risk preference of the capital market may usher in an inflection point. In addition, the omni-directional game between China and the United States will also continue to disturb the market risk aversion mood. We believe that there is still room for further upside in gold prices in the future.
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