(Kitco News) - After nearly four years of lackluster interest, investors are paying more attention to gold prices as gold-backed exchange-traded funds saw significant inflows in February, according to the latest data from the World Gold Council.
Investment demand was driven by near-record inflows into North American-listed funds. According to the data, 72.2 tonnes of gold, valued at $6.8 billion, flowed into North American ETFs. The report said that this was the largest single-month inflow for the region since July 2020 and the strongest February on record.
"Lower yields, alongside a weaker dollar, boded well for the gold price during most of the month – in fact, it reached nine new record highs in February before moving lower in the latter half,” the analysts said in the report. “We believe reduced opportunity costs and a record-shattering gold price were key in attracting inflows. Moreover, a pullback in equity markets and fears of stagflation were also likely positive drivers of demand.”
Investment demand on the other side of the Atlantic was slightly more mixed. The WGC said that only two tonnes of gold, valued at $151 million**,** flowed into European-listed ETFs as U.K. markets saw outflows while Germany and Switzerland continued to book gains.
“Expectations for continued cuts from the European Central Bank this year have intensified amid the on-course disinflation progress and slower growth. This might have been a key factor underpinning inflows into other European gold ETFs,” the analysts said. “Additionally, heightened uncertainty during the run-up to the German federal election in late February may also have provided support.”
While Europe sees muted demand, Asian investors continue to buy all things gold. Asian-listed gold-backed ETFs saw inflows of 24.4 tonnes of gold, valued at $2.3 billion last month. Demand was led by Chinese investors.
“Despite positive equity market sentiment – particularly around AI stocks amid the DeepSeek frenzy – the surging local gold price was attention-grabbing. In fact, the Baidu Search Index of the keyword 'gold' rocketed to its highest since 2013,” the analysts said.
Looking ahead, analysts have noted that although investment demand and ETF inflows are surging, holdings are still well below the levels seen in previous bull markets. In 2020, when gold first broke above $2,000 an ounce, ETF holdings increased by 892.5 tonnes.
While gold prices appear to be consolidating below $3,000 an ounce, the WGC said that its modeling shows a healthy environment for gold prices as inflation risks rise along with global economic uncertainty.
“Uncertainty appears to be the undertone across markets. Concerns over tariffs, and the wide-ranging impact they could have on global growth, continue to cast a cloud and question U.S. exceptionalism. This has added to already rising geopolitical risk,” the analysts said. “A move up in the GPR [Geopolitical Risk] index of 100 points is typically linked to a 2.5% increase in the price of gold, all else equal. Similarly, a rise in 10-year break-even inflation expectations of 50bps is typically associated with an approximate 4% rise in gold prices. And a 50bps fall in 10-year Treasury rates over the long run has been associated with a 2.5% rise in gold.”
