Gold and oil experience massive shocks, prompting fund reallocations: Gold ETFs "lose blood," and crude oil LOF premiums soar

Ask AI · The outflow of funds from gold ETFs and the rebound in prices diverge, reflecting what kind of market sentiment change?

When international gold and oil prices oscillate repeatedly, the market’s capital flow has shown significant differentiation.

On March 24, the volatility levels of gold and oil narrowed compared to the previous trading day. As of the time of writing, London spot gold was reported at $4,430 per ounce, a slight increase of 0.27%; WTI crude oil retreated slightly after peaking, reported at $90.33 per barrel, with a rise of 1.78%.

In the domestic market, the gold stock ETF Huaxia (159562.SZ) rose by over 6%, with a total trading volume of 2.381 million yuan and a turnover rate of 8.19%. In contrast, the oil LOF from E Fund (161129.SZ) and the oil LOF from Harvest (160723.SZ) saw trading volumes of 450 million yuan and 990 million yuan, respectively, within just one hour after resuming trading in the morning, both exceeding a turnover rate of 100%.

On March 24 at noon, the Shenzhen Stock Exchange announced that due to the aforementioned two LOFs’ secondary market trading prices not falling back within the premium range, a temporary suspension of trading would be implemented from the afternoon market opening until market close, based on the application from the fund company and relevant business rules of the Shenzhen Stock Exchange.

Huaxia Fund told Yicai that oil prices have already reflected a considerable degree of conflict impact, and considering global supply and demand and substitutes, it is highly unlikely for oil prices to remain above $100 in the long term. “For crude oil, the most sensitive asset, unless there are sustained supply disruptions, price surges are often seen as selling opportunities rather than the beginning of a trend,” Huaxia Fund stated.

Gold and Oil Continue to Diverge

On March 24, the spot gold price displayed a pronounced “V-shaped” reversal—falling to $4,314 per ounce during trading, before recovering above the $4,400 mark at the time of writing; WTI crude oil prices fluctuated around $90 per barrel. The previous trading day saw spot gold prices drop over 8.7%, while WTI crude oil briefly surpassed $101 per barrel.

In the A-share market, the precious metals sector rebounded strongly after yesterday’s sharp decline, with the CSI Hong Kong-Shenzhen Gold Industry Stock Index (931238) rising 4.25%, and stocks like Zijin Mining (601899.SH) and Zhaojin Gold (000506.SZ) increasing over 5%. However, the oil and gas sector, which saw gains yesterday, performed poorly today, with all three major oil companies closing down.

This sharp divergence in price movements over a short period has also led to a notable change in the flow of funds.

According to iFinD data, on March 23, out of 14 commodity gold ETFs in the market, 12 reported net outflows, totaling 2.253 billion yuan, with the largest, Huaxia Gold ETF (518880.SH), experiencing a net outflow of 1.156 billion yuan in one day, the only ETF with net outflows exceeding 1 billion yuan that day.

At the same time, gold stock ETFs Yongying (517520.SH), Huaxia (159562.SZ), and Guotai (517400.SH) also faced sell-offs, with a combined net outflow of over 500 million yuan.

On the other hand, oil and gas-themed LOFs were frequently reminded of premiums. On March 23, several fund companies, including E Fund, Harvest, Huaxia, and Southern Fund, announced temporary suspensions for their crude oil and oil and gas-themed LOFs for one hour starting from the market opening on March 24.

From the announcements, some products’ secondary market trading prices significantly deviated from the fund’s net value. For instance, E Fund’s announcement showed that the net asset value of the crude oil LOF E Fund was 1.7047 yuan on the previous trading day, while its closing price in the secondary market on March 23 was 2.387 yuan. Based on this data, the fund’s premium rate that day was around 40%.

E Fund reminded investors to closely monitor the premium risk of secondary market trading prices and to make prudent investment decisions. If investors blindly buy at high premiums that significantly deviate from the actual asset value, they may face substantial investment losses due to subsequent price declines in the secondary market.

However, these measures failed to curb the frenzied speculation. On March 24 at noon, the Shenzhen Stock Exchange announced that the crude oil LOF E Fund and Harvest crude oil LOF would implement a temporary suspension from the afternoon market opening until close due to the premium levels in today’s secondary market trading prices not falling back.

The data shows that during the only hour of trading today, both of these assets saw turnover rates exceed 100%, with the capital game reaching near fever pitch. Among them, the premium rate of crude oil LOF E Fund was pushed above 50%, while the premium rate of Harvest crude oil LOF was as high as 48%.

Senior researcher Yu Fenghui from Pangu Think Tank analyzed for Yicai that the recent sell-off of gold-themed ETFs and the speculative premium on oil-themed funds reflects investors’ short-term expectation adjustments for different assets rather than a fundamental shift in long-term preferences.

“Gold, as a safe-haven asset, becomes less attractive when market uncertainty decreases; conversely, as signs of global economic recovery increase, expectations for energy demand rise, pushing up oil prices and the popularity of related investment products,” he stated.

Central Bank Gold Purchases May Be Overestimated

Today, gold prices and related assets rebounded somewhat, but several gold-themed ETFs have recently seen net outflows, with more than 2 billion yuan flowing out of 12 commodity gold ETFs in just one day on March 23.

Zhongtai Securities believes that since the escalation of the current conflict, sectors such as oil shipping, ports, and coal chemical industries have experienced a phase of rapid price increases, with the rise closely mirroring oil price fluctuations and geopolitical developments. These main lines are essentially still in a game of short-term event developments, with significant short-term volatility. At this stage, the market’s expectations for the prolonged nature of the conflict have largely been reflected in prices, and the marginal cost-effectiveness of continuing to speculate on event escalations is declining. Once geopolitical risks show any marginal easing or trading fervor decreases, profits may face rapid reversals, compounded by the current crowded trading in certain sectors, leading to significant amplification of sector volatility.

Huaxia Fund informed Yicai that, based on historical data, the market initially tends to overestimate the worst-case scenario, and once the situation clarifies, the geopolitical risk premium will quickly dissipate. According to their statistics, in past military events since 1980, oil prices and stock markets have returned to pre-shock levels within approximately 4 to 5 months.

HuaTai Futures also pointed out that crude oil futures have now become a barometer or gambling tool for the Iranian conflict, with market conditions likely to fluctuate drastically following developments. Either going long or short presents poor safety margins.

Regarding the continued weakness in gold prices, Ren Fei, a fund manager at China-Europe Fund, indicated that in the short term, the U.S.-Iran conflict is raising energy inflation expectations, and the Fed’s hawkish signals from the March FOMC meeting are limiting monetary easing space, directly impacting gold. From a medium to long-term perspective, the U.S. is attempting to alleviate debt and credit pressures through strengthened resource control, and the initial military strength of the U.S. and Israel has boosted the dollar index, further shaking the medium to long-term pricing foundation of gold.

However, Ren Fei remains optimistic about the long-term trajectory of gold. He suggested that the current Middle East situation has fallen into a tug-of-war, and the U.S. is further accumulating debt in this process, negatively impacting its own credit; at the same time, the U.S. needs to lower interest rates to relieve debt pressures and support AI development, making it difficult for monetary policy to tighten.

Additionally, during this round of rising gold prices, continuous purchases by central banks in various countries are considered one of the important supports for gold prices. A recent report from CICC suggested that the current rise in gold prices is more a result of the global “de-financialization” background and the revaluation of the value of physical assets, and that the main forces behind increased gold holdings are emerging markets and developing countries, especially those with non-floating exchange rate regimes, rather than a universal global phenomenon, and its motivation and sustainability may be overstated by the market.

Cheng Tianyi, a senior researcher at Qingdao Anzhi Investment, told Yicai that the current environment is characterized by high uncertainty and rapid risk release. On one hand, short-term volatility has intensified, increasing operational difficulty; on the other hand, some relatively low-position directions have lost the necessity for further significant reduction due to prolonged adjustment time and large magnitude.

He suggests that investors maintain a neutral yet cautious strategy, where relatively low-position directions should neither panic-sell nor blindly increase positions aggressively, but rather patiently await clear signals of market stabilization and rebound trends.

(This article is from Yicai)