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Investors once again see value in gold as 61.3 tonnes flows into ETFs in May - WGC

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Editor's Note: Inflow data in the article's headline was wrong and has been created

(Kitco News) - Investors are once again jumping back into the gold market, ending three months of consecutive outflows in gold-backed exchange-traded funds (ETF), according to the latest data from the World Gold Council (WGC)

In its latest market report, the WGC said that global gold-backed ETFs saw inflows of 61.3 tonnes last month, reversing outflows reported in February, March and April. The analysts added that a confluence of factors has helped drive investment demand back into the precious metal.

"We believe this to be largely a function of investment demand increasing with the price strength of gold, along with renewed inflation concerns in the market, a weaker dollar and lower real yields," the analysts said in their report.

The WGC noted that last month gold prices rose 7.5% to push above $1,900 an ounce.

"Gold is now effectively flat on the year, rallying 13% in the last two months," the report said.

The price rally and renewed investment demand have pushed the value of global assets under management (AUM) to $222 billion, down only 9% from the August highs seen last year, the WGC said. At the same time, global holdings now stand at 3,628 tonnes, just 7% shy of the October 2020 record high of 3,908 tonnes.

"Gold remains a promising asset for investors as market behavior continues to be controlled by inflationary pressures coupled with the US dollar diluting in strength and lower real yields, further seen by the increase in gold price," said Adam Perlaky, senior analyst, at the WGC in a statement.

Looking at regional data, North American gold funds led the way in growth, with holdings rising by 34.5 tonnes. Meanwhile, European funds saw inflows of 31.2 tonnes. The WGC said that it also saw strong inflows into low-cost ETFs.

"The 181 tonnes of low-cost assets now represent 5% of the total global gold ETF market compared with less than 3% a year ago," the WGC said.

Although gold prices have been unable to hold last month's gains above $1,900 an ounce, the WGC said that they continue to see supportive factors for the precious metal in the near term.

"Our short-term price performance model suggested that all but two of the underlying variables we use had a positive contribution to gold's performance – the first month this has happened since June 2011," the analysts said.

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