(Kitco News) - The first month of 2024 saw a continuation of 2023’s outflows from gold ETFs led by North America, with European funds continuing to see heavy losses while Asia saw another monthly inflow, according to the latest data from analysts at the World Gold Council (WGC) published Wednesday.
“Global physically backed gold ETFs began 2024 with US$2.8bn outflows in January, stretching their losing streak to eight months,” the WGC fund flows and holdings report noted. “This was equivalent to a 51t reduction in global holdings, to 3,175t by the end of January. Meanwhile, total assets under management (AUM) fell to US$210bn, a 2% decline due to outflows in the month and a 1% gold price fall.”
North American funds saw losses of US$2.3bn in January, ending the brief streak of two consecutive months of inflows for the region. “Recent robust US economic data has led investors to reassess their bets on the Fed’s first rate cut in March – the probability priced in by swap markets fell sharply,” the analysts said. “As a result, both the dollar and the 10-year Treasury yield rebounded, weighing on the gold price and leading to sales of gold ETFs. And with US equities reaching new highs, local investors’ appetite for gold was further dented.”
With January’s decline, the collective holdings of North American funds fell to their lowest level since April 2020, with the largest funds seeing the heaviest outflows.
Across the pond, Europe stretched its streak of consecutive net outflows to eight months, and while the region liquidated $730 million worth of gold holdings in January, it was still far less than the $2 billion in net outflows the month prior.
“Although the European Central Bank (ECB) held rates unchanged for the third successive meeting in January, officials have been vocal in delivering the message that the market may have gone too far in pricing early rate cuts,” the analysts noted. “And this gave local investors a reality check, pushing back their bets on lower interest rates ahead and fuelling notable rebounds in the region’s government bond yields and currencies. Combined with lacklustre performances of gold prices in the area, investors continued to dial down their gold ETF holdings.”
Meanwhile, Asian funds added $215 million in net inflows in January, extending their streak of net inflows to 11 consecutive months. “China continued to dominate the region’s inflows as the sixth consecutive monthly fall in local equities and a weaker currency lifted investors’ safe-haven demand,” they said.
The Other region saw only limited changes in gold ETF demand, adding $8 million during the month, with most of the demand coming from South Africa.
“Globally, low-cost gold ETFs saw their eighth consecutive monthly outflow in January, losing US$207mn (-4t),” they wrote. “North America (-US$243mn) drove global outflows while low-cost funds in Europe registered inflows (+US$32mn.) Following January’s loss, the total AUM of low-cost funds declined by 1% to US$55bn. Meanwhile, their collective holdings fell to 832t, the lowest since April 2021.”
Gold-backed ETFs and similar products account for a significant part of the gold market, with institutional and individual investors using them to implement many of their investment strategies. Flows in ETFs often highlight short-term and long-term opinions and desires to hold gold.
The data in the report tracks gold held in physical form by open-ended ETFs and other products such as closed-end funds, and mutual funds. Most funds included in the dataset are fully backed by physical gold.
