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Gold prices hit new all-time highs of $2,182 an ounce on March 11, 2024.1 The rise of the October 5, 2023 lows marked a 19.91% price increase in a little over five months.2 Needless to say, there has been quite a party going on in gold markets recently.

So why wasn’t everyone invited?

Central banks have been adding to their gold holdings for several years, and hedge funds have dramatically increased their gold exposure on futures exchanges over the last month. Adding to exposure has allowed them to attend the price party. On the other hand, ETF investors have been selling gold – and have less of it – now than a few years ago.

What led to the difference in opinion on gold?

Foreign Central Banks purchased 1,081 tons of gold in 2022 and 1,037 tons in 2023, the number one and two highest yearly official sector purchases on record.3

Foreign central banks are selling US treasury bonds and buying gold to marginally diversify away from US dollar holdings after the last four US presidents used the US dollar exchange system to enforce US foreign policy. China has reduced US treasury holdings by 38% between November 30, 2013, and December 31, 2023.4

The Peoples Bank of China, the central bank, has been a consistent gold purchaser, as February marked the sixteenth consecutive month of purchases.5 Foreign central bank demand increases are the result of "a deeper malaise" amid "the West's proclivity to deploy unilateral financial sanctions," according to the Council of Foreign Relations.6

Helping lead the more recent gold gains was a significant jump in the open interest of gold futures on the COMEX.7 Since February 20, 2024, open interest climbed from 407,000 contracts to 536,000, a 30% gain in interest.8 That is still a fair bit away from the open interest of 800,000 contracts on January 15, 2020, but the point remains it is a significant and sudden increase. Hedge funds – typically the more prominent investors in futures markets due to leverage ability – likely participated in that gain.

While it is difficult to ascribe a reason to such a diversified group as hedge funds, one thing is true: the last three times the federal funds rate9 hiking cycle ended, gold made some pretty extraordinary gains. In 2000, 2006, and 2018, the peak of the last three hiking periods, gold went on to gain 57%, 235%, and 69%, respectively. Perhaps some in the investment community believe we are getting close to the first Federal Reserve10 cut. Markets have priced in a 53% chance of a rate cut in June.11

ETF investors have a different view

Since April 22, 2022, ETF investors have sold 750 tons of gold to March 14, 2024. ETF investors now hold fewer ounces of gold than at any time since September 25, 2019.12

On the other hand, ETF investors make gold allocation decisions based on the level and direction of real interest rates – interest rates minus inflation. As real interest rates rise, investors sell gold to buy interest-bearing securities. Since January 2022, real interest rates have risen from 0.1% to 1.8%, so this investor segment is selling gold and buying interest-bearing assets like money market funds and bonds. That could change if the federal funds rate9 is cut in the coming months.

Another stark contrast

The price rise in gold also highlights another stark contrast.

While gold is trading at an all-time high price,13 the silver price is at a 50% discount to its all-time high.14 To find out why, we contrast the major sources of demand for gold and silver.

Gold demand is typically 50% from jewelry and 13% from industrial activities, which include technology, electronics, and dentistry. Yearly demand from the jewelry and industrial sectors is mostly stable, while demand from central banks and the ETF sectors are highly variable. Central banks and treasuries make up official sector demand, which rose from 8.8% in 2017 to 23.3% last year,15 representing a dynamic change in demand. ETF investor demand fell from +892 tons in 2020 to -244 tons in 2023,15 an even more dramatic change.

In contrast, silver demand is typically 17% from jewelry and 50% from the industrial sector, nearly the opposite weighting of gold. It is important to note that industrial demand is correlated to the economic health of the global economy, especially the Chinese economy. Silver bars, coins, and silver ETFs can account for 25% of demand, and it is also variable. In contrast to gold, the official sector has a de minimis factor of less than 0.2%.16 Silver demand is driven more by the health of the industrial economy and ETF flows.

China optimism may bode well for commodities

The global industrial economy's strength has been underappreciated for over a year. China ended zero COVID policies at the end of 2022 in a move that surprised investors and created some optimism. However, Chinese economic stimulus packages last year were much smaller than similar shock-and-awe-sized US stimulus packages, causing the Chinese economy to underperform expectations. Yet incremental stimulus packages continue to be released as Beijing attempts to achieve a 5% GDP growth in 2024.17

Some reasons for optimism about the Chinese economy:

  • The recently released budget shows government spending minus taxes and fees levied amounts to a fiscal package that is the strongest since 2020, in proportion to the size of the economy.
  • Chinese banks extended a record-high amount of new loans during the first month of 2024
  • The five-year loan prime rate was lowered by 25 bps in February, marking the first cut since June 2023 and the largest cut in history.
  • Aggregate financing increased by 6.5 trillion Chinese yuan (CNY)18 in January, up from 1.94 trillion CNY in December.
  • Purchasing managers’ index (PMI)19 gauges showed general improvement in both services and construction.
  • The number of domestic tourism trips during the eight-day Lunar New Year holiday rose 34% from last year's level to a record high of 474 million visits.20

The optimism has not yet flowed into the pricing of related assets that trade at historical discounts, including silver, industrial metals, and emerging market equities.

Final thoughts

ETF investors have sold 317 million ounces of silver between February 2, 2021, and March 15, 2024.21 Silver is trading at $24 an ounce, roughly a 50% discount from its all-time high which occurred in April 2011 at $48.55 an ounce.22 We find it particularly interesting that the April 2011 silver price occurred during extreme solar panel growth. A 1-megawatt solar panel installation contains 5,000 solar panels, each with 20 grams of silver in them, totaling 3,500 ounces of silver.

Historically when gold prices are so much higher than silver, it marks a period of lower interest rates before the industrial economy improves. This can be seen in October 2008, March 2016, and March 2020, which produced silver returns of 434%, 40%, and 143%, respectively.23

Stay tuned.

1 Bloomberg gold price, March 2024.
2 Bloomberg gold price return, 10/5/2023–3/11/202.
3 "Gold Demand Trends Full Year 2023." World Gold Council, January 2024. https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-full-year-2023.
4 Bloomberg China-US treasury holdings, 11/30/2013–12/31/2023.
5 "China Splurges on Gold For a 16th Month as Price Hits Record." Bloomberg, March 2024. https://www.bloomberg.com/news/articles/2024-03-07/china-s-gold-splurge-reaches-16th-month-as-prices-hit-record.
6 The Council on Foreign Relations is an American think tank for US foreign policy and international relations.
7 COMEX is one of the four exchanges including CME, CBOT, and NYMEX that make up the CME Group of exchanges. COMEX specializes in precious, base, and ferrous metals trading.
8 Bloomberg COMEX exchange open interest gold contracts, 3/20/2019–3/15/2024.
9 Federal funds rate is the target interest rate set by the Federal Reserve at which commercial banks borrow and lend their extra reserves to one another overnight.
10 Federal Reserve is the central banking organization for the United States.
11 Bloomberg, March 2024.
12 Bloomberg ETF gold holdings, 9/25/2019–3/15/2024.
13 "Here’s Why Gold Is At A Record High Despite Strong U.S. Stock Market And Economy." Forbes, March 2024. https://www.forbes.com/sites/dereksaul/2024/03/09/heres-why-gold-is-at-a-record-high-despite-strong-us-stock-market-and-economy/.
14 Bloomberg silver price, 1/1/1949–3/15/2024.
15 "Historical demand and supply." World Gold Council, January 2024. https://www.gold.org/goldhub/data/gold-demand-by-country.
16 The Global Source. Silver Supply & Demand. The Silver Institute. https://www.silverinstitute.org/silver-supply-demand/.
17 "China vows to 'transform' economy, sets ambitious growth target." Reuters, March 2024. https://www.reuters.com/world/china/china-targets-2024-gdp-growth-around-5-government-work-report-2024-03-05/.
18 CNY is Chinese Yuan, the official currency of China.
19 PMI is Purchasing Managers Index that summarizes whether market conditions are expanding, staying the same or contracting as viewed by purchasing managers.
20 "China's travel spending during Lunar New Year holidays beats pre-COVID levels." Reuters, February 2024. https://www.reuters.com/markets/asia/chinas-travel-spending-during-lunar-new-year-holidays-beats-pre-covid-levels-2024-02-18/.
21 Bloomberg ETF silver holdings, 2/2/2021–3/15/2024.
22 Bloomberg silver price, 4/1/2011 and 3/15/2024.
23 Silver price 10/27/2008–4/28/2011, 2/26/2016–8/2/2016, and 3/18/2020–8/10/2020.

Important information

The statements and opinions expressed are those of the author and are as of the date of this report. All information is historical and not indicative of future results and subject to change. Reader should not assume that an investment in any securities and/or precious metals mentioned was or would be profitable in the future. This information is not a recommendation to buy or sell. Past performance does not guarantee future results.
Trading in commodities entails a substantial risk of loss and is not suitable for all investors.
Diversification does not eliminate the risk of experiencing investment losses.
Prospectuses for abrdn Physical Gold Shares ETF, abrdn Physical Palladium Shares ETF, abrdn Physical Platinum Shares ETF, abrdn Physical Precious Metals Basket Shares ETF and abrdn Physical Silver Shares ETF
Projections are offered as opinion and are not reflective of potential performance.
Projections are not guaranteed, and actual events or results may differ materially.
ALPS Distributors, Inc. is the marketing agent.
There are risks associated with investing including possible loss of principal.
ALPS is not affiliated with abrdn.

ETF002170 2/28/25
AA-190324-175661-1

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Investors should carefully consider a fund’s investment objectives, risks, fees, charges, and expenses before investing any money. To obtain this and other fund information, please call 866-667-9231 to request a summary prospectus and/or prospectus, or download at www.abrdn.com/us. Please read the summary prospectus and/or prospectus carefully before investing any money.

Aberdeen Fund Distributors, LLC is a wholly owned subsidiary of abrdn Inc. abrdn Inc. is a wholly-owned subsidiary of abrdn plc. abrdn Funds are distributed by Aberdeen Fund Distributors LLC, Member FINRA and SIPC. 1900 Market Street, Suite 200, Philadelphia PA, 19103.

NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE

For ETFs, please call 844-383-7289 or click here to access a prospectus online. Investing involves risk, including possible loss of principal. ETF shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund.

Important Risks

The abrdn Gold ETF Trust, abrdn Silver ETF Trust, abrdn Precious Metals Basket ETF Trust, abrdn Platinum ETF Trust and abrdn Palladium ETF Trust are not investment companies registered under the Investment Company Act of 1940 or a commodity pool for purposes of the Commodity Exchange Act. Shares of the Trusts are not subject to the same regulatory requirements as mutual funds. These investments are not suitable for all investors. Trusts focusing on a single commodity generally experience greater volatility.

Commodities generally are volatile and are not suitable for all investors. Trusts focusing on a single commodity generally experience greater volatility. Please refer to the prospectus for complete information regarding all risks associated with the Trusts. Shares in the Trusts are not FDIC insured and may lose value and have no bank guarantee.

The value of the Shares relates directly to the value of the precious metal held by the Trust and fluctuations in the price could materially adversely affect investment in the Shares. Several factors may affect the price of precious metals, including:

A change in economic conditions, such as a recession, can adversely affect the price of the precious metal held by the Trust. Some metals are used in a wide range of industrial applications, and an economic downturn could have a negative impact on its demand and, consequently, its price and the price of the Shares;

Investors’ expectations with respect to the rate of inflation;

Currency exchange rates;

Interest rates;

Investment and trading activities of hedge funds and commodity funds; and

Global or regional political, economic or financial events and situations. Should there be an increase in the level of hedge activity of the precious metal held by the trust or producing companies, it could cause a decline in world precious metal prices, adversely affecting the price of the Shares. Should there be an increase in the level of hedge activity of the precious metal held by the Trusts or producing companies, it could cause a decline in world precious metal prices, adversely affecting the price of the shares.

Also, should the speculative community take a negative view towards the precious metal held by the Trusts, it could cause a decline in prices, negatively impacting the price of the shares. There is a risk that part or all of the Trusts’ physical precious metal could be lost, damaged or stolen. Failure by the Custodian or Sub-Custodian to exercise due care in the safekeeping of the precious metal held by the Trusts could result in a loss to the Trusts.

The Trusts will not insure its precious metals and shareholders cannot be assured that the custodian will maintain adequate insurance or any insurance with respect to the precious metals held by the custodian on behalf of the Trust. Consequently, a loss may be suffered with respect to the Trust’s precious metal that is not covered by insurance.

Commodities generally are volatile and are not suitable for all investors.

Investors buy and sell shares on a secondary market (i.e., not directly from Trusts). Only market makers or "authorized participants" may trade directly with the Trusts, typically in blocks of 25k to 100k shares.

Commodities generally are volatile and are not suitable for all investors. This material must be accompanied or preceded by the prospectus. Carefully consider each Trust’s investment objectives, risk factors, and fees and expenses before investing. Please click here to review the prospectus.

ALPS Distributors, Inc. is the marketing agent for the abrdn Gold ETF Trust, abrdn Silver ETF Trust, abrdn Precious Metals Basket ETF Trust, abrdn Platinum ETF Trust and abrdn Palladium ETF Trust.

ALPS Distributors, Inc. is the distributor for abrdn ETFs.

ALPS Distributors, Inc. is not affiliated with the companies of abrdn.

'40 Act Fund Disclosure:

An investor should consider the investment objectives, risks, charges and expenses of the ETFs carefully before investing. To obtain a prospectus containing this and other important information, call 1-844-383-7289 or visit www.abrdn.com/us/etf. Read the prospectus carefully before investing.

Fund Risk: There are risks associated with investing including possible loss of principal. Commodities generally are volatile and are not suitable for all investors. There can be no assurance that the Fund’s investment objective will be met at any time. The commodities markets and the prices of various commodities may fluctuate widely based on a variety of factors. Because the Fund's performance is linked to the performance of highly volatile commodities, investors should consider purchasing shares of the Fund only as part of an overall diversified portfolio and should be willing to assume the risks of potentially significant fluctuations in the value of the Fund. Actively managed ETFs do not necessarily seek to replicate the performance of a specified index. Actively managed ETFs are subject to risks similar to stocks, including those related to short selling and margin maintenance. The Fund’s return may not match the return of the index.

Through holding of futures, options and options on futures contracts, the Fund may be exposed to (i) losses from margin deposits in the case of bankruptcy of the relevant broker, and (ii) a risk that the relevant position cannot be close out when required at its fundamental value. In pursuing its investment strategy, particularly when rolling futures contracts, the Fund may engage in frequent trading of its portfolio of securities, resulting in a high portfolio turnover rate.
As a "non-diversified" fund, the Fund may hold a smaller number of portfolio securities than many other funds. To the extent the Fund invests in a relatively small number of issuers, a decline in the market value of a particular security held by the Fund may affect its value more than if it invested in a larger number of issuers. The value of Shares may be more volatile than the values of shares of more diversified funds.

During situations where the cost of any futures contracts for delivery on dates further in the future is higher than those for delivery closer in time, the value of the Fund holding such contracts will decrease over time unless the spot price of that contract increases by the same rate as the rate of the variation in the price of the futures contract. The rate of variation could be quite significant and last for an indeterminate period of time, reducing the value of the Fund.

Changes in the laws of the United States and/or the Cayman Islands, under which the Fund and the Subsidiary are organized, respectively, could result in the inability of the Subsidiary to operate as intended and could negatively affect the Fund and its shareholders.

To the extent the Fund is exposed directly or indirectly to leverage (through investments in commodities futures contracts) the value of that Fund may be more volatile than if no leverage were present.

In order to qualify for the favorable U.S. federal income tax treatment accorded to a regulated investment company ("RIC"), the Fund must derive at least 90% of its gross income in each taxable year from certain categories of income ("qualifying income") and must satisfy certain asset diversification requirements. Certain of the Fund’s investments will not generate income that is qualifying income. The Fund intends to hold such commodity-related investments indirectly, through the Subsidiary. The Fund believes that income from the Subsidiary will be qualifying income because it expects that the Subsidiary will make annual distributions of its earnings and profits. [However, there can be no certainty in this regard, as the Fund has not sought or received an opinion of counsel confirming that the Subsidiary’s operations and resulting distributions would produce qualifying income for the Fund.] If the Fund were to fail to meet the qualifying income test or asset diversification requirements and fail to qualify as a RIC, it would be taxed in the same manner as an ordinary corporation, and distributions to its shareholders would not be deductible by the Fund in computing its taxable income. Investors buy and sell shares on a secondary market (i.e., not directly from the Trust). Only market makers or authorized participants may trade directly with the funds, typically in blocks of 25K to 100K shares.

The abrdn Bloomberg Industrial Metals K-1 Free ETF is new and has limited operating history.

“Bloomberg®” and “Bloomberg Commodity Index Total ReturnSM,” “Bloomberg Commodity Index 3 Month ForwardSM” and “Bloomberg Industrial Metals Subindex Total ReturnSM” are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the indices (collectively, “Bloomberg”) and have been licensed for use for certain purposes by abrdn ETFs Advisors LLC. Bloomberg is not affiliated with abrdn ETFs Advisors LLC, and Bloomberg does not approve, endorse, review, or recommend abrdn Bloomberg All Commodity Strategy K-1 Free ETF (BCI), abrdn Bloomberg All Commodity Longer Dated Strategy K-1 Free ETF (BCD), and abrdn Bloomberg Industrial Metals K-1 Free ETF (BCIM). Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to Bloomberg Commodity Index Total Return, Bloomberg Commodity Index 3 Month Forward” and “Bloomberg Industrial Metals Subindex Total Return".

Please see the current prospectus, www.abrdn.com/us/etf for more information regarding the risk associated with an investment in the Funds.

S&P 500: The S&P 500 Index is the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices.

Standard Deviation: Standard deviation is a statistical measure of the extent to which returns of an asset vary from its average.

Bloomberg Commodity Index: The Bloomberg Commodity Index (BCOM) is a broadly diversified commodity price index distributed by Bloomberg Indexes.

Discount- A situation when the share price of a fund trades below its net asset value.

Premium- A situation when the share price of a fund trades above its net asset value.

The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market.

Annualized Volatility is a statistical measure of the dispersion of returns for a given security or market index

Beta is a measure of the volatility, or systematic risk, of an individual stock in comparison to the unsystematic risk of the entire market

Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk
NAV or Net Asset Value represents the per share/unit price of the fund on a specific date or time.

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