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More than six tonnes of gold liquidated from global ETF in December, ETF holdings down 173 tonnes in 2021 - WGC

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Welcome to Kitco News' 2022 outlook series. The new year will be filled with uncertainty as the Federal Reserve looks to pivot and tighten its monetary policies. At the same time, the inflation threat continues to grow, which means real rates will remain in low to negative territory. Stay tuned to Kitco News to learn from the experts on how to navigate turbulent financial markets in 2022.

(Kitco News) - A fitting end to a disappointing year, global gold-backed exchange-traded funds (ETFs) saw further outflows in December, according to the latest data from the World Gold Council.

In a report published Friday, the WGC said that 6.4 metric tonnes of gold flowed out of global ETFs last month. December capped a year that saw a total of 173 tonnes of gold liquidated from ETFs worldwide, the report noted.

The outflows last month were led by North American as funds liquidated 22 tonnes of gold last month. The report added that European-based and Asian-based funds saw inflows totaling 16 tonnes.

"North American outflows once again stemmed from larger US funds, likely triggered by the US Federal Reserve (Fed) indicating its intent for multiple interest rate hikes in 2022 to combat decades-high inflation, while planning to scale back asset purchases early in the year," the analysts said in the report.

Many analysts have noted that gold's nearly 4% drop in 2021 was due to lackluster investment demand as the sector saw consistent outflows through the year. However, the WGC noted one positive from last year.

Capital Economics is top LBMA gold forecaster for bearish 2021 prediction

"Despite considerable outflows for the year, gold ETF holdings remain significantly above pre-pandemic levels, as they posted record inflows of approximately 875t during 2020," the analysts.

In 2022, the WGC sees a mixed outlook for gold as historic low real interest rates due to rising inflation pressures are weighed against the Federal Reserve's tightening monetary policy.

"We're staying vigilant of evolving monetary policies and a possible increase in interest rates at a more expedited speed, as signified by the Federal Reserve's recent announcement, which could impede gold performance. However, historically, rates remain low and will continue to support gold demand given its role as a high-quality liquid asset as portfolio structure continues to change to accommodate market volatility," Adam Perlaky, senior analyst at the WGC, said in a statement.

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