Physically-backed gold exchange-traded funds (ETFs) experienced net outflows in June 2023. The collective holdings of global gold ETFs fell by 56 tonnes ($3.7 billion) to 3,422 tonnes, with their total assets under management (AUM) reaching $211 billion, down 4 per cent month-on-month (m-o-m).
In effect, the net outflows, put a halt to the three-month inflow streak from March-May 2023, according to the latest report on gold trends by the World Gold Council (WGC).
According to the report, titled Gold ETF Commentary, the majority of outflows occurred when the gold price dropped during the second half of the June 2023, amid hawkish rate hikes from major central banks in the face of inflationary pressure.
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The outflow also caused the global gold ETF demand during H1 2023 to turn negative at 50 tonnes, equivalent to fund outflows of $2.7 billion, the report says.
REGIONAL HIGHLIGHTS - OUTFLOWS
All regions barring Asia experienced outflows in June 2023.
North American fund flows turned negative for the first time in four months, losing $1.7 billion. Though the US Federal Reserve paused its aggressive rate-hiking path, a higher interest rate projection pushed investor rate expectations higher. As a result, the allure of gold ETFs, which was already dented by weakness in gold prices, waned, the report said.
Europe saw negative fund flows of $1.8 billion in June, with UK leading the region’s outflow. Gold ETF demand was further dented as the central banks continued with their hawkish rate hikes in the face of looming inflationary pressure, the report said, adding that only FX-hedged products in Switzerland and Germany made positive contributions.
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Only Asia had marginal inflows of $71 million, up by 1 tonne in June 2023. China was the key contributor.
EFFECT ON FUNDS
Demand for North American funds remained positive at 20 tonnes in H1 2023, up by $1.5 billion. Elsewhere, European funds accounted for the bulk of H1 global outflows, registering a negative demand of 69 tonnes, down by $4.2 billion. Funds listed in the UK and Germany lost the most.
There was mild inflow into Asian funds in H1 2023.
TRADING VOLUMES DIP IN JUNE
Global gold market trading activities dipped in June 2023, averaging 152 billion per day, down 13 per cent from May 2023. Gold trading volumes at exchanges fell by 29 per cent, while average daily volumes of global gold ETFs also fell 21 per cent m-o-m, the report added.
