Equity exodus: Investors rush to gold ETPs amid market turbulence
Investors fled European equities last month as the shocks of war in Ukraine continued to drive an exodus towards safe haven assets, fresh data has revealed.
European equity flows turned negative in March for the first time since October 2020 as outflows hit $6.5bn, their highest level since August 2019, according to exchange-traded-product (ETP) data from investment giant BlackRock.
The sell-off frenzy was led by European ETPs which registered their largest monthly net sell on record.
Investors scrabbled for a safe place to put their cash however, and gold products saw record inflows of cash last month. Around $11.3bn was pumped into into gold ETPs, a fivefold increase on February’s levels, trouncing the previous high of $9.4B set in July 2020.
Analysts at BlackRock said the flows were to be expected given months of increasing demand for gold and major turbulence in equity markets.
“This has come amid increased safe-haven moves in the market, but the propensity to buy gold has been building – we’ve seen a persistent flow trend emerge, with three consecutive inflow months for the first time since August-October 2020,” they said in a note today.
“Gold buying was spread across listing regions, in line with the trend YTD. So far in 2022, flows into gold ETPs total $16.3B, more than reversing 2021’s net outflows of -$9.8B.”
Broader commodity ETPs were popular with investors as a further $1.8bn was added in March, continuing a six-month inflow trend, analysts said.
But some investors have pounced on the volatility in the markets as an opportunity to snap up stakes across sectors, led by heightened focus on energy ETPs in light of the supply shocks brought on by the conflict in Ukraine.
“While investors allocated to energy ($1.7B) in March, we’ve actually seen inflows across the sector spectrum – highlighting that investors are using this market volatility to build up allocations across the barbell,” analysts said.
“This was also reflected in factor ETPs – while value flows turned flat in March, investors continued to add to quality with a net buy of $2.2B, the largest inflow month so far in 2022,” analysts said.
The data from BlackRock comes as data from the Investment Association today revealed that retail investors similarly began to abandon their positions in February.
Outflows from retail funds accelerated to £2.5 billion in February 2022, up from £1.2 billion in January, according to data published today.
Analysts at Hargreaves Lansdown said it was no surprise given the global financial uncertainty.
“Markets have been difficult to navigate in the past month, sending investors broadly in two directions – capital preservation and opportunistic trading,” said Emma Wall, Head of Investment Analysis and Research.
“As the war in Ukraine caused uncertainty and volatility, and the outlook for inflation across the globe rose ever higher, investors have pulled money out of markets and off the table.”