Global gold exchange-traded funds (ETFs) ended their four-month run of positive inflows in May with net outflows of 53 tonnes, or $3.1 billion, as the US dollar edged higher and higher on the precious metal in the early part of the month. interest rates were charged. According to a report by the World Gold Council.
While May saw the biggest monthly outflow since March 2021, total holdings were 8% higher year-on-year (YTD) at 3,823 tonnes or $226 billion.
On the other hand, Indian Gold ETFs saw a smaller net inflow of 0.4 tonnes in May, mainly due to the macro backdrop of high inflation and depreciating rupee.
On the Indian retail market, WGC in its report said that demand remained strong during the first three weeks of May due to strong Akshaya Tritiya sales, wedding demand and a lower base than last year.
However, Indian retail demand softened during the last week of the month due to higher gold prices and less auspicious marriage dates, said the Market Development Organization of the Gold Industry.
“With the recovery in demand, the premium in the local market rose to $4-5 an ounce by the third week of the month as compared to a discount of $7-10 an ounce at the end of April. Softening retail demand and trading were bullish stocks. liquidation pushed the local market to a discount of $3-4 an ounce by the end of May,” the council said.
On global markets, WGC said, “Motivation from ETF outflows also propelled the move to $1,800 an ounce in the middle of the month. Gold recovered sharply from that level – with a one-dollar pullback and a lower US 10-day.” But the rebound ran out of steam – with year-end real yield lending support and gold closed the month hovering around $1,850.
Global gold fell 3.8% in May, pushing it up 2% year over year to $1,839.
According to the WGC, strong bi-directional equity volatility failed to support gold prices as the short-term momentum weakened.
Looking ahead, the Council believes that the gold price has undergone a seasonal turnaround in recent years, indicating that a historically strong late-summer rally may come sooner than usual.
“While the current market conditions are unlike anything we have seen historically, continued equity weakness could very well trigger a rally in the price of gold.”
The council also highlighted that gold’s recent performance was a by-product of sourcing liquidity to beaten-down segments of the market, despite some concern that gold may struggle if equity markets turn bullish.
“In fact, in some instances of the stock market rally in recent weeks, gold has also been up most of the time. Additionally, we have found that, historically, gold has maintained a positive performance across most long-term stock rallies,” the WGC said.