Global gold exchange-traded funds (ETFs) reported net outflows of $4.5 billion in July. According to a report by the World Gold Council, this was the third consecutive and worst month since March 2021.
Such funds generated an outflow of $1.7 billion in June and $3.1 billion in May.
Indian gold ETFs saw modest outflows as investors took profits amid a sharp correction in domestic gold prices and expectations of further weakness. Despite net outflows during the month, India has been able to reduce inflows by about one tonne year-on-year.
According to the report, a strong US dollar and COMEX net long positions – the lowest since April 2019 – helped push gold price below the $1,800 per ounce support level. Gold closed at US$1,753 at the end of July, down 2.8% that year.
Overall, the year-over-year global flow is about 153 tonnes, or $10.3 billion.
“Despite outflows in recent months, 2022 almost offset 2021 outflows, highlighting the continued strategic demand for gold. Total holdings at the end of July stood at 3,708 tonnes or $209 billion, up 5% this year,” the WGC said in the report.
All regions except Asia experienced outflows in July. North American holdings led the outflow, which fell $2.8 billion driven by the largest and most liquid US funds.
“A 75-basis point rate hike by the Federal Reserve helped propel the dollar index to a 20-year high. This, along with a late-month rebound in equities, encouraged North American investors — at least To shift strategic ones – to riskier assets,” the report said.
Furthermore, despite net outflows into the sector, the influx of low-cost gold ETFs into North America continued the monthly trend we’ve seen for the past four years about 90% of the time, highlighting continued growth in the space. does.
European funds lost $2.1 billion due to the outflow of UK-based funds. It came on the back of a hike in rates by the EU for the first time in 11 years and a larger than expected 50bp amount.
Funds in Asia showed a strong jump in demand ($446 million) after the first half outflows. All inflows came from China, which had the worst absolute outflows during the first half of the year, mainly due to profit-taking amid a strong local gold price in Q1.
In terms of outlook, the WGC said the market reaction at the July Fed meeting could encourage a more sustained decline in the US dollar and an increase in riskier assets. “This could benefit gold but also risk tightening the Fed’s resolve,” the council said.
“Historical analysis suggests that current futures market conditions in Gold, US Dollar and US 10-Year Treasury may indicate good potential for positive forward returns for gold,” it added.
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