Global physically backed exchange-traded funds (ETFs) saw their fourth consecutive month of inflows in August, driven by increased holdings in funds listed in North America and Europe, according to the World Gold Council (WGC) as reported by Reuters.
Gold ETFs, which hold physical bullion for investors, play a crucial role in the investment demand for gold. The precious metal reached a record high of $2,531.60 per ounce on August 20, supported by expectations of forthcoming U.S. interest rate cuts.
Despite this recent positive trend, gold ETFs had experienced outflows for three consecutive years due to high global interest rates. The recent four-month inflow streak has only partially offset the year-to-date losses, resulting in a net outflow of 44 metric tons, the report noted.
Increased Holdings and Total Assets
In August, gold ETFs added 28.5 tons, valued at $2.1 billion, raising their total holdings to 3,182 tons, according to the WGC. The surge in gold prices and the recent inflows boosted total assets under management to $257.3 billion in August.
Trading Trends
The report highlighted that global gold trading volumes declined by 3.2% in August compared to the previous month, with daily trading volumes averaging $241 billion, primarily due to reduced exchange-traded activity on COMEX. However, activity in the more opaque over-the-counter (OTC) market rose by 5.9%, averaging $158 billion.
Speculator Behavior
With gold prices up by 21% in 2024 and mounting expectations of U.S. interest rate cuts, speculators on COMEX increased their net long positions by 17% in August, reaching 917 tons—the highest level since February 2020, as per the report.
Additional Insight: The increase in gold ETF holdings and positive price trends indicate a growing interest in gold as a safe-haven asset amid economic uncertainties. The shift in speculator behavior underscores the importance of geopolitical and monetary policy factors in gold’s value. As global economic conditions continue to evolve, the dynamics of gold ETFs and trading volumes are likely to reflect ongoing market sentiment and investor strategies.
