Global Gold ETFs Experience 50-Tonne Outflow In H1 – World Gold Council

Total holdings in gold-backed exchange-traded funds (ETFs) reversed during the first half of 2023 due to heavy outflows in June, data from the World Gold Council (WGC) shows.

Global ETFs recorded net outflows of 56 tonnes of the yellow metal last month. This snapped a run of three consecutive net inflows and took total holdings down to 3,422 tonnes.

As a result, total assets under management (AUM) slipped 4% month on month, to $211 billion.

The WGC noted that “the early June strong equity market performance in key markets likely shifted focus away from risk-off assets such as gold.”

It added that “the majority of outflows occurred when the gold price dropped during the second half of the month amid hawkishness from major central banks in the face of obstinate inflationary pressure.”

Bullion prices reversed 2.4% last month and breached key support below $1,900 per ounce at one stage before recovering ground. The yellow metal ended June around the $1,920 marker.

Last month’s net outflows meant that global ETFs held 50 fewer tonnes of gold than they did at the start of the year. AUMs fell by $2.7bn over the period.

North American Holdings Fall

In North America, fund flows turned negative for the first time in four months in June, the WGC said. Total ETF holdings on the continent dropped by 27 tonnes to 1,747 tonnes. Meanwhile AUM slumped by $1.7 billion to around $107 billion.

The WGC said that “although the US Fed paused its aggressive rate-hiking path, a higher interest rate projection from the board and Powell’s recent hawkish statements pushed investor rate expectations steadily higher.”

Falling gold prices and a fresh rally in equity markets also dimmed the appeal of gold ETFs, the organisation commented.

Yet despite last month’s decline, gold ETFs experienced net inflows of 20 tonnes in North America. Demand was propped up by concerns over stability of the banking system and a possible global recession, the WGC said.

Europe Leads H1 Outflows

Holdings in European ETFs dropped to 1,497 tonnes by the end of June, down 26 tonnes month on month. For the first half Europe-located funds experienced net outflows of 69 tonnes.

The WGC noted that “gold ETF demand was dented as the region’s central banks carried on their hawkish rate hikes in the face of looming inflationary pressure.”

Net outflows were especially high in the UK in June, at 22 tonnes. This was driven by the Bank of England’s decision to hike interest rates by 50 basis points. Total AUMs in European ETFs dropped by $1.8 billion last month, to $92 billion.

However, net inflows in Asian ETFs ticked 1 tonne higher in June to take total holdings to 119 tonnes.

The WGC commented that “as economic uncertainties lingered, the local currency depreciated and the [renminbi] gold price stabilised around the record high, gold ETFs became more appealing to Chinese investors.”

Strong Chinese demand meant that Asian AUM rose by $71 million to $7.7 billion. For the first half of 2023 ETFs enjoyed net inflows of 1 tonne.

Across the rest of the world, ETFs endured net outflows of 4 tonnes in June “as negative demand in Australia and South Africa dwarfed Turkish inflows.” AUM dropped by $268 million last month to $3.7 billion.

Total holdings stood at 60 tonnes at the end of June, down from 61 tonnes at the start of the year.