Global gold exchange traded funds (ETFs) recorded inflows for two consecutive months to end-June, with Asian buying offsetting outflows in North America.
Gold-backed ETFs attracted $1.4-billion of investment in June, with inflows having been widespread except for North America.
In general, lower yields in key regions and non-dollar currency weaknesses increased gold’s allure to local investors, reports the World Gold Council (WGC).
Further, the first half of the year remains the worst since the first half of 2013 with year-to-date losses of $6.7-billion from ETFs having been recorded.
Total gold ETF holdings were 3 105 t at the end of June, having dropped by 3.9% year-on-year.
A stronger gold price and recent inflows helped to push the total assets under management to $233-billion in June, which remains at its lowest since 2020.
WCF says trading volumes in different gold markets witnessed a mild decline in June, however, the average for the first half of the year remains well above its 2023 level as over-the-counter and futures trading were exceptionally active.
While Asian funds attracted a record $3-billion of inflows during the first half of the year, they were significantly outpaced by collective outflows in North America and Europe at $9.8-billion.
It is worth noting that Western gold ETF investors did not react as anticipated to the rise in the gold price – which commonly drives up investment flows – amid high interest rates and a more risk-on sentiment generated by the AI boom being experienced globally.
In contrast, Asian flows matched price strength – weaknesses in non-dollar currencies and gold’s staggering performance in those currencies attracted investors in the region.
North America ultimately had ETF outflows of $573-million in June, with the dollar strength and a continued equity rally having drawn investor attention away from gold despite falling Treasury yields.
The region’s outflows totalled just under $5-billion in the first half of the year – the most significant in three years.
European funds added $1.4-billion in June, which helped narrow the region’s outflows in the first half of the year to $4.9-billion.
European central banks adopted a different path to that of the US Federal Reserve. For example, in June, the European Central Bank delivered its first rate cut in five years while the Swiss National Bank lowered rates for the second time this year.
Lower yields were therefore a key contributor to the region’s inflows.
Nonetheless, the first half of the year saw $8-billion of outflows from gold-backed ETFs in Europe.
The Asian inflows were driven by China, which added $429-million of holdings in June, contributing to the total $560-million of inflows for the region.
In the first half of the year, Asia registered inflows of $3.1-billion, which outpaces all other markets in the period. It also represented the stronger ever first half for Asian funds.
The total assets under management of Asian funds reached $14-billion in the first half of the year, which is the highest on record, while collective holdings increased by 41 t in the period.