Gold prices have pulled back sharply by 11% since March, with gold stock ETFs experiencing significant declines, while funds are flowing counter-trend into physical gold ETFs

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Since March, the gold market has experienced a deep correction, accelerating downward after today’s hawkish Federal Reserve interest rate decision, with international and domestic gold prices hitting new lows for the period. Today, spot gold briefly touched $4,670 per ounce, and gold industry stock ETFs experienced a wave of limit-downs.

Analysis shows that currently, investment products containing gold are mainly concentrated in various gold-themed ETFs, physical gold ETFs, and bank wealth management products. During the gold price correction in March, the net asset value of gold ETFs tracking physical gold declined with the market, but they still saw net capital inflows against the trend. However, on the 19th, capital flows sharply reversed, with leading funds experiencing single-day net outflows exceeding 5 billion yuan.

Compared to this, on the 19th, gold industry stock products fell far more than gold prices themselves and continued to face redemption, resulting in poor net value performance. Gold-related bank wealth management products lagged in performance, and their affected status is not yet known.

International and domestic gold prices both plummeted, with a cumulative decline of over 11% since March

The recent weakness in the gold market began in early March.

Under the pressure of a hawkish signal from the Federal Reserve’s March meeting, the decline peaked on March 19. International spot gold (London Gold Price) reached a high of $5,419.32 per ounce on March 2 before entering a downtrend. By the close on March 18, it had fallen to $4,813.53 per ounce, a decline of over 11% since March. The decline intensified at the start of trading on March 19, with spot gold briefly dropping to $4,670 per ounce.

The domestic gold market also faced pressure, with both futures and spot prices falling sharply. The main contract on the Shanghai Futures Exchange saw its largest decline since March, dropping 10.84%, especially on March 19, opening 2.2% lower at 1,089.00 yuan/gram, then falling another 4.63% to a low of 1,057.20 yuan/gram, the lowest since February 6. The Shanghai Gold Exchange’s deferred delivery contract (Gold T+D) also weakened, falling 4.38% on March 19 to 1,062.39 yuan/gram, with a low of 1,056.68 yuan/gram during the day.

Gold ETFs “buy more as prices fall,” outperforming gold stock-themed ETFs

Notably, despite the continuous decline in gold prices dragging down the net asset value of physical gold-tracking ETFs, the overall market for gold ETFs experienced large net capital inflows, showing a typical “buy more as prices fall” pattern.

According to Wind data compiled by Cailian Press, from March 1 to 18, the net asset values of leading gold ETFs declined slightly, but their scale steadily increased. For example, Huaxia Gold ETF, Bosera Gold ETF, Guotai Gold ETF, and E Fund Gold ETF saw net values drop about 2.75%, but their scales grew by 1.71%, 2.28%, 2.55%, and 3.57%, respectively.

Huaxia Gold ETF’s shares increased by 549 million units, with the scale growing by 2.125 billion yuan to reach 126.215 billion yuan by March 18, maintaining the top position in the industry.

Market analysts point out that the steady growth in scale during the net value correction phase indicates some investors view gold ETFs as long-term asset allocation tools, engaging in left-side positioning and buying on dips. Short-term volatility has not changed their core allocation logic.

Chart: Huaxia Gold ETF still “attracting funds” recently (data as of March 18)

Data source: Wind, compiled by Cailian Press

However, on March 19, the gold market experienced a rare panic sell-off, with Huaxia Gold ETF experiencing net outflows of over 5 billion yuan that day, indicating a rapid trend reversal.

Chart: Market value performance of some gold ETFs on March 19

Data source: Wind, compiled by Cailian Press

According to Guoxin Futures research report, “The main reason is that the Fed’s dot plot shows expectations of further rate cuts are converging, exceeding expectations,” and Powell’s remarks leaned towards cautiousness. He pointed out that the impact of Middle East tensions on the U.S. economy remains uncertain, even mentioning the possibility of “next steps being rate hikes.” The dollar index accelerated upward, putting comprehensive pressure on precious metal valuations. Guoxin Futures suggests paying attention to support around 1,050 yuan for Shanghai gold, adopting a cautious approach, and waiting for macro sentiment stabilization.

In terms of gold industry stock ETFs, performance has been poor since March, with increased pressure on earnings.

Chart: Performance of some gold-themed ETFs

Data source: Wind, compiled by Cailian Press

In the table above, the China Asset Management CSI Shanghai-Shenzhen-Hong Kong Gold Industry ETF’s return was as low as -6.74% by March 18. After hitting the limit-down on the 19th, its decline for the month reached 16.83%. Overall, gold industry stock ETFs have fallen about twice as much as gold ETFs.

Market participants believe that ETFs tracking the stock prices of companies in the gold industry chain have endured much greater pressure than gold ETFs. The divergence is due to the fact that gold industry stocks are affected not only by the direct decline in international gold prices but also by overall A-share market sentiment, sector valuation adjustments, and individual stock fundamentals.

It is worth noting that, contrasting with the net capital inflows into gold ETFs, some gold industry stock ETFs experienced significant capital outflows. For example, as of March 18, Yongying’s similar gold industry stock ETF saw a net outflow of 1.267 billion yuan, and today, it experienced another nearly 1 billion yuan net outflow.