Gold-backed exchange-traded funds (ETFs) experienced their 11th consecutive month of decline, as reported by the World Gold Council (WGC). The decrease was primarily driven by heavy liquidations in Europe, resulting in a total drop of 33 tonnes in bullion-backed ETF holdings. This marked the lowest level in over four years, with outflows amounting to $2 billion. Despite this, the strengthening gold price led to an increase in total assets under management (AUMs) to $229 billion.
The price of gold reached a new record high of $2,364 per ounce in April, fueled by concerns over the macroeconomic and geopolitical landscape, which increased interest in the safe-haven commodity. In Europe, the second-largest gold ETF market, outflows continued as funds saw a decrease of 52 tonnes, bringing aggregate holdings to 1,279 tonnes. This resulted in the eleventh consecutive monthly decline, with outflows totaling $4 billion. However, AUMs in Europe rose to $95 billion despite cooling inflation readings and reduced expectations of rate cuts by major central banks.
While Europe experienced outflows, North American and Asian gold ETFs saw inflows that helped offset losses. North American funds received a one-tonne inflow, increasing total holdings to 1,575 tonnes and AUMs to $117 billion. This marked the second consecutive month of positive flows, driven by the strong gold price performance triggering in-the-money call options and inflows from geopolitical risks and financial market volatilities. In Asia, gold-backed ETFs had inflows of 19 tonnes totaling $1 billion, with 167 tonnes of metal and AUMs reaching $13 billion. China played a significant role in driving inflows and reaching the highest AUM ever due to factors like a sluggish equity market, expectations of a weaker local currency, promotional efforts from ETF providers, and strong price performance.
The ongoing decline in gold-backed ETFs in Europe, despite rising prices, reflects investor sentiment towards interest rate changes by central banks. While Europe saw outflows, North America and Asia experienced inflows, driven by various factors like strong price performance, geopolitical risks, financial market volatilities, and promotional efforts. North America saw a rise in AUMs to $117 billion, with positive flows for the second consecutive month, while Asian funds reached a high AUM linked to record monthly inflows and other driving forces. Looking ahead, the future of gold-backed ETFs may be influenced by global economic conditions, central bank policies, geopolitical uncertainties, and market volatility, driving investor interest and decisions regarding safe-haven assets like gold.
