Global gold-backed ETFs recorded net outflows of USD3.1 billion in May, reversing course after a four-month run that saw inflows push total global gold holdings just 1 per cent shy of the all-time high seen in November 2020, according to new data released today by the World Gold Council.
While this was the largest monthly outflow since March 2021, total holdings remain 8 per cent higher year-to-date at 3,823t (USD226 billion), the World Gold Council says.
ETF flows closely mirrored the movement in the gold price. While the rising US dollar and higher interest rates weighed on gold in early May, the price rebounded amid a dollar pullback and lower US 10-year real yield lending support, but ultimately settled at USD1,850/oz.
North American funds: decreased by USD2 billion (1.7 per cent AUM), accounting for almost two thirds of total outflows, while European funds were down USD1 billion (1 per cent AUM), driven by a fourth consecutive Bank of England rate hike.
In Asia, funds recorded USD77 million (1 per cent AUM) in outflows, again driven by Chinese market conditions, the World Gold Council says.
Low-cost ETFs saw minor outflows of USD86 million (2.5 per cent) in May and gold daily trading averages recovered from an April decline to USD137 billion per day.
Gold fell 3.8 per cent in May, finishing the month at USD1,839/oz.
Adam Perlaky, senior analyst at the World Gold Council says: “Gold ETFs finally saw their momentum halted in May, after registering four consecutive months of inflows. Higher interest rates and a stronger US dollar weighed on gold to start the month and never fully recovered, and ETF investment activity followed suit.
“While North American-listed funds accounted for nearly two thirds of total outflows, central bank behaviour will ultimately be a significant determinant of investment activity looking forward.
“While investors have recently expressed the sentiment that central bank actions are too little too late, they are hopeful that the Fed may not raise interest rates as much as previously expected, given recent weak economic data. There are two factors they should consider looking forward. First, while gold is a long-term strategic asset, its seasonality has shifted in recent years. Since 2000, August has replaced September as the second-strongest performing month for gold. Additionally, gold has historically performed well during sustained stock market pullbacks, such as the one we are experiencing now. It’s worth noting that gold has registered positive returns during nine out of the 10 worst quarterly returns by the S&P 500 since 1971.”