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Gold investment demand continues to struggle but market is improving - World Gold Council

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(Kitco News) - The gold market is still struggling to attract new investor interest that would push prices out of their trading range. However, the World Gold Council (WGC) said that it does see some improvement in the marketplace.

Thursday, the WGC said that 18.3t tonnes of gold, valued at $1.1 billion, flowed out of the global gold-backed exchange-traded funds (ETFs) in April, marking outflows for five of the past six months. In total, global assets under management (AUM) stand at 3,567 tonnes, valued at $203 billion.

"Since the peak asset levels in November 2020, gold ETF AUM has fallen nearly 14%, with 8% coming from outflows and 6% coming from the gold price selloff in US dollar terms," the analysts said.

However, the WGC did some bright spots in the gold market. In particular, European funds saw gold inflows last month for the first time since January.

According to the report, North American-based gold funds led the way in outflows in April, with total holdings dropping by 28.4 tonnes. In comparison, European-based funds saw inflows of 10.6 tonnes.

The report also noted inflows into low-cost ETFs. In a recent interview with Kitco News, Juan Carlos Artigas, head of research at the WGC, said that the rise in low-cost gold EFTs is an indication that investors are trying to keep their costs down as they build long-term strategic positions in their portfolios.

Although the investment demand has been fairly disappointing since the start of the year, analysts at the WGC said that they expect to see a pick-up through the second half of 2021. They noted that rising inflation pressure continues to support the precious metal.

"Rising inflation expectations and questions around central bank tapering are front and center for investors. Despite recent increases in inflation, central banks have maintained their accommodative stance in words and actions. Markets remain nervously poised for the outcome of rising inflation and central banks' reactions to it," the analysts said in a separate report.

The WGC also noted that rising bond yields could continue to be a headwind for gold in the short term.

Another support for gold prices through 2021 continues to be the COVID-19 pandemic and concerns that a global rise in cases could weigh on economic activity.

"Despite further signs of economic improvement and rallying equity indices, investor optimism for a quick recovery seems to have subsided in April. Should optimism continue to slide in May, we believe this could be positive for safe-haven demand for gold but may weigh on consumer demand," the WGC said.

The WGC’s optimistic outlook for investment demand comes as gold prices push above $1,800 an ounce for the first time since early February. June gold futures last traded at $1,811 an ounce, up 1.5% on the day

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