Weak gold prices cool Gold ETF outflows

Mar 09, 2023

According to the latest Gold ETF commentary published by World Gold Council (WGC) said, Gold ETF outflows continued in February amid weak gold prices!

Global physically backed gold ETFs witnessed another month of outflows, losing US$1.7bn in February. A stronger dollar and rising yields led to a 5% decline in the gold price, which may have discouraged gold ETF investors. Outflows were widespread, with the exception of funds in the other region, where collective holdings rose marginally.

Overall, collective gold ETF assets under management (AUM) declined by 1% to US$200bn. Meanwhile, global gold ETF holdings saw the tenth consecutive month of tonnage decline, falling by 34t (-1.0%) in February to 3,412t, the longest losing streak since January 2014.4 During the first two months of 2023, global gold ETFs lost US$3.4bn (-61t, -1.8%).

European funds continued to drive global outflows as the region’s central banks kept delivering outsized rate hikes.5 After losing US$1.2bn (-25t, -1.7%) in February, European funds recorded their tenth consecutive monthly outflow, although at a slower pace than January (US$2.1bn). UK funds (-US$740mn, -13t) once again made up the bulk of the region’s outflows.

North American gold ETFs lost US$547mn (-10t, -0.6%), their first monthly outflow in 2023 after two consecutive months of inflows. As US inflation pressure has unexpectedly intensified, investors are now anticipating higher interest rates for longer.6 Coupled with the gold price fall, local appetite for gold waned.

Funds listed in Asia saw mild outflows of US$4mn (-0.1t, -0.1%) during the month. Japan inflows (+US$17mn, +0.3t) were outweighed by outflows from funds listed in China (-US$45mn, -0.7t). Funds in the Other region witnessed another inflow of US$83mn (+1t, +2%) in February, mainly helped by Turkey (+US$82mn, +1t).

Trading remained active despite a weaker gold price! Daily trading volumes across all gold markets averaged US$147bn during February, an 8% fall from the previous month (US$159bn). Nonetheless, the average volume remains 13% above 2022 (US$132bn).

Physical gold markets remained active, daily average trading volumes of the OTC gold market rose by 3% m-o-m. And trading activities of global gold ETFs held steady. But there was a 23% m-o-m decline in exchange-traded gold derivatives’ average trading activities: a decline in COMEX volumes outpaced rises on other exchanges.

Please note that due to delays in the Commodity Futures Trading Commission’s data release schedule, the analysis of net longs in COMEX gold futures is not available in this report.

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