NEW DELHI: Global gold exchange-traded funds (ETFs) reported net outflows for the fifth consecutive month in September as holdings fell by 95 tonnes, or $5 billion. This was the biggest monthly outflow since March 2021, according to a report by the World Gold Council (WGC).
As of the end of September, global gold ETF holdings stood at 3,548 tons, or $191 billion, a 1% decrease in tonnage since the beginning of the year.
In Asia, Indian gold ETF inflows of 0.4 tonnes were higher than outflows in Chinese-listed funds during September at 0.3 tonnes.
According to the WGC, retail demand in India started off on a good note in September, driven by a correction in local gold prices and festival-related buying. Demand slowed down in the country during the inauspicious period of Pitru Paksha (September 10-25), but lower prices prompted some consumers to both spot purchase and book in advance for upcoming festivals and weddings. The month was positive with good buying ahead of Navratri.
In global markets, North American ($3 billion) and European funds ($2 billion) made massive outflows. The largest and most liquid US funds made outflows around the world as the US Federal Reserve raised interest rates by 75 basis points due to extremely high inflation. UK, German, Swiss and French listed funds were the main contributors to the overall decline in European holdings, encouraged by the British Pound Sterling crisis triggered by higher interest rates and fiscal policy decisions from the European Central Bank.
“Conditions for gold remained challenging throughout the month due to higher yields on the back of a strong US dollar and swift actions by the US Fed,” said the WGC, the market development organization for the gold industry.
Gold fell 2.6% for the sixth straight month in September to close at $1671.8 an ounce. It was a challenging month for most assets, with global equities down 9.5%, global bonds down 5.1% and commodities down 8.4%.
“While a relative outperformer and thus a good diversification, gold was not a crisis hedge, it often has historically been, certainly when measured in US dollars. However, for non-US investors, gold underperformed over the years. remains strong on a year-on-year basis,” the WGC said.
The Council believes that the dollar will be a major driver of gold prices over the next few months and sees risks to the dollar’s strength primarily from valuations, positions and further central bank intervention, which will support gold. .
“Furthermore, it appears that gold investors now view policy rates as less of a threat to gold than previously,” the WGC said.
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