(Kitco News) - Gold faces headwinds as persistent inflation pressures support higher interest rates, driving bond yields and the U.S. dollar higher. However, investors continue to see value in the precious metal, as demand for gold-backed exchange-traded funds remained positive through September.
In its latest monthly ETF report, the World Gold Council (WGC) said that 67.3 tonnes of gold, valued at nearly $10 billion, flowed into global ETFs last month. The analysts added that September’s strong performance lifted third-quarter inflows to a record $31 billion, with European- and North American-listed funds leading demand.
“During Q3, global gold ETFs’ total AUM rose 9%, while collective holdings grew by 211t. At the country level, the record Q3 inflow was led by the US, followed by an impressive contribution from UK-listed funds. The UK recorded its strongest quarter on record, helping Europe achieve the same milestone at the regional level,” the analysts said.
Meanwhile, North American gold-backed ETFs recorded their first quarterly inflows of 2026, reversing significant investment outflows during the first half of the year.
According to the WGC, North American-listed funds attracted $11.7 billion in investment inflows during the third quarter, representing 81.3 tonnes of gold. The strong quarterly performance was enough to offset earlier losses, bringing year-to-date inflows to $4.1 billion, equivalent to 20.7 tonnes.
In September alone, North American-listed ETFs attracted nearly $4 billion in investment inflows, representing 27.7 tonnes of gold. U.S.-listed funds accounted for nearly all of the region's monthly demand, attracting $3.8 billion, while Canadian-listed funds recorded more modest inflows of $206 million.
“September’s inflows came despite a challenging domestic backdrop for gold. The Federal Reserve raised interest rates by 25 basis points2 during the month and signalled that further tightening could follow, contributing to upward pressure on Treasury yields and the dollar. These developments increased the opportunity cost of holding gold and weighed on its price,” the analysts said. “Nevertheless, persistent inflation and elevated energy prices, concerns over equity valuations – particularly in AI-related sectors – and increased bond-market volatility may have reinforced gold’s appeal as a portfolio diversifier. Continued inflows also suggest that some investors viewed the price pullback as an opportunity to build or maintain strategic positions rather than reduce exposure.”
Across the Atlantic, European-listed gold ETFs saw inflows of 21.7 tonnes, valued at $3.6 billion. The WGC said that UK demand was the largest contributor to the region’s inflows last month.
“The persistence of inflows into UK-listed funds was particularly notable. They recorded inflows in 12 of the 13 weeks through 25 September – the most consistent run since 2022 – suggesting sustained investor interest rather than a reaction to a single event. Recent inflows have coincided with a rising gilt term premium, potentially reflecting broader investor concerns over inflation uncertainty, fiscal sustainability and sovereign bond-market risks; factors that may have reinforced gold’s appeal as a portfolio diversifier,” the analysts said.
Meanwhile, Asian demand, which has been a pillar of strength throughout 2026, saw its third consecutive monthly increase. Investment demand for gold-backed ETFs was led by China, while India, Japan, South Korea and Singapore also recorded inflows during the month, highlighting the breadth of regional buying.
“Despite a weaker gold price, Chinese funds continued to attract inflows amid renewed weakness in domestic equities and declining government bond yields, both of which supported gold’s relative appeal. Inflows continued into Indian funds, potentially supported by a pullback in domestic equities, opportunistic dip buying and increased demand for portfolio diversification,” the analysts said.
Looking ahead, WGC analysts said that bond yields could continue to play an important role in the gold market. U.S. 10-year Treasury yields remain well above 5%, even as markets see only a slim chance of a rate hike later this month.
“Recent US data no longer support the case for an imminent hike, and markets have lowered tightening expectations not only for the Fed, but also for the Bank of England and the ECB. If bond yields remain elevated despite this mildly dovish repricing, it would suggest that investors are focused less on near-term policy rates and more on deeper fiscal and term-premium risks, potentially continuing to support gold demand,” the analysts said in a separate report.
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