Global physically backed gold exchange-traded funds (ETFs) experienced their second consecutive month of inflows, attracting USD 1.4 billion in June according to the World Gold Council.
These inflows were widespread, with all regions seeing positive gains except North America, which faced mild losses for the second month.
Lower yields in key regions and weaknesses in non-dollar currencies increased gold's allure to local investors, pushing global gold ETFs' total assets under management (AUM) 8.8 per cent higher year-to-date to USD 233 billion. Collective holdings also rebounded, reaching 3,105 tonnes.
Despite the positive trend in June, global gold ETFs have lost USD 6.7 billion year-to-date, marking their worst first half (H1) since 2013.
Total holdings have dropped by 120 tonnes (-3.9 per cent) to 3,105 tonnes during this period, well below their October 2020 monthly high of 3,915 tonnes.
While Asian funds attracted a record USD 3 billion during H1, they were significantly outpaced by collective outflows in North America and Europe, which amounted to USD 9.8 billion.
Western gold ETF investors did not react as anticipated to the rise in the gold price, which commonly drives up investment flows.
This was amidst a high level of interest rates and a more risk-on sentiment generated by the AI boom. In contrast, Asian flows aligned with the price strength; weaknesses in non-dollar currencies and gold's strong performance in those currencies attracted investors in the region.
North America continued to see mild outflows, shedding USD 573 million in June. The strength of the dollar and the continued equity rally may have drawn investor attention away from gold despite falling Treasury yields.
Nonetheless, flare-ups in geopolitical risk prompted sporadic inflows, partially offsetting larger outflows during the month.
European funds added USD1.4 billion in June, the second consecutive month of inflows. This helped narrow Europe's H1 outflows to USD 4.9 billion.
The region's central banks adopted a different path from that of the US Federal Reserve. In June, the European Central Bank delivered its first rate cut in almost five years, while the Swiss National Bank lowered rates for the second time this year.
In the UK, the Bank of England hinted at a potential cut but left rates unchanged following a surprise general election announcement.
Lowering yields were a key contributor to the region's inflows, along with falling equities and political uncertainties related to elections in the UK and France, which sparked notable inflows.
Nonetheless, 2024 saw the worst first half for European funds since 2013, with USD 8 billion in outflows. Despite a 6 per cent fall in holdings, total AUM of European funds experienced a 6.3 per cent rise during the first half, thanks to the higher gold price.
Asia extended its inflow streak to 16 months, attracting USD 560 million in June. Similar to previous months, Asian inflows were mainly driven by China, which added USD 429 million in the month.
Global gold trading volumes across various markets averaged USD195 billion per day in June, down 9.5 per cent month-on-month.
In contrast, exchange-traded derivatives saw a 32 per cent month-on-month plunge: volumes at COMEX fell by 35 per cent month-on-month and Shanghai futures trading continued to cool, down 24 per cent. Gold ETF trading volumes contracted by 15 per cent month-on-month, mainly due to North American funds.
Meanwhile, money manager net longs rose further, reaching 575 tonnesat the end of June, a 3 per cent increase month-on-month and the highest month-end value since February 2020.
Total net longs and money manager net longs have risen in H1 by 13 per cent and 36 per cent respectively - the strong gold price performance and various uncertainties on multiple fronts may have attracted investors. (ANI)
