Gold markets have been experiencing a significant surge, reflecting both economic conditions and geopolitical tensions. A recent report illustrates a robust interest in gold-backed exchange-traded funds (ETFs), particularly among Western investors. The World Gold Council (WGC) reported that gold funds recorded a notable inflow of 53 tonnes in August, marking the third consecutive month of increased investments in this asset class. Total holdings now stand at 3,692 tonnes, nearing the all-time highs of 3,929 tonnes reached in November 2020.
Monetarily, the inflows amounted to $5.5 billion, contributing to a record high of assets under management (AUM) at $407.3 billion. Year-to-date ETF inflows have reached $47 billion, the second-highest figure recorded following the pandemic year of 2020. The rising prices of gold, which have climbed almost 5% in August alone due to escalating macroeconomic and geopolitical tensions, further underpin this growing investor interest.
In North America, gold-backed ETFs saw inflows of 37 tonnes, valued at approximately $4.1 billion. This marks the third consecutive month of growth in this region, driven by factors such as persistent trade risks and broader market uncertainty. The easing of rate expectations, following insights from the Federal Reserve’s recent comments, has also played a role in boosting the appeal of gold as a safe-haven asset. Holdings in North America reached 1,906 tonnes, and AUMs stood at $210.2 billion.
The WGC noted a growing demand for low-cost bullion funds, indicating that investors are increasingly viewing gold ETFs as a strategic move to hedge against uncertainties in the broader market. The organization characterized the current year as witnessing the strongest demand for gold-backed ETFs, suggesting that investors are solidifying their safe-haven allocations.
In Europe, funds benefitted from a fourth consecutive monthly inflow, with an additional 37 tonnes or $1.9 billion added, pushing AUMs to $154.2 billion. Notable contributions came from the UK, Switzerland, and Germany. Switzerland’s demand was particularly spurred by a significant 39% trade tariff imposed by the US, which has heightened safe-haven needs among local investors.
Conversely, Asia experienced outflows of 5 tonnes, equating to $495.3 million, with total physical holdings dropping to 317 tonnes. Nonetheless, the value of Asian AUMs rose slightly to $35.2 billion due to the stronger prices of gold. The report highlighted a decrease in interest from China, which coincided with local stock market rallies. However, India’s gold-backed ETFs saw continued inflows, attributed to escalating safe-haven needs amid weak equity performances and ongoing global uncertainties.
As geopolitical tensions, particularly those tied to conflicts and economic policies, continue to influence market behavior, gold remains a focal point for investors seeking stability and security in their portfolios.
