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Global gold ETFs see inflows of nearly 14 tonnes in January - WGC

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(Kitco News) - Investor demand was relatively healthy in January even as the price saw its worst start to the new year since 2013, according to the latest data from the World Gold Council (WGC).

Thursday, the WGC said that gold holdings in global gold-backed exchange-traded funds (ETF) increased by 13.8 tonnes in January, according to its monthly ETF flows report. Januarys inflows came after two consecutive months of outflows at the end of 2020.

The WGC noted that the investor demand increased as the price of gold dropped 1.3% in January. "This left gold as one of the weakest performing assets during the month, particularly when compared to the broader commodities complex,"the analysts said. "As the new year ushered in the start of the Biden Administration, there was renewed hope for further fiscal stimulus in the U.S., supported by the Federal Reserve maintaining their dovish stance; this kept gold constrained."

The report noted that European-based gold ETF led the way in investor demand with holdings increasing by 17.5 tonnes; meanwhile, North American investors shed their gold positions as holding dropped by 6.3 tonnes. Other regions saw inflows of 2.7 tonnes, while Asian markets were relatively unchanged. 

Although the gold market continues to struggle to find consistent buying momentum, WGC analysts remain confident that investment demand will remain strong through 2021. 

"We believe investment demand for gold will remain strong in 2021 as investors react to inflation, global rates, and risk around budget deficits and equity market corrections. The reverse course weve seen in global gold-backed ETFs from consecutive outflows at the end of 2020 to inflows now in January supports our view,"said Adam Perlaky, manager of investment research at WGC.

"Although we may not see overall inflows doubling over the course of the year as in 2020, we do expect investors to maintain allocations in gold to hedge against the market environment and risks that have carried over to the new year."

The outlook comes as gold prices fall below support at $1,800 an ounce. April gold futures last traded at $1,787.7 an ounce, down 2.5% on the day.

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