Gold ETFs Diverge From Spot Prices: Record Ninth Consecutive Month Of Outflows

Global physically backed gold ETFs recorded outflows for the ninth consecutive month despite gold trading at fresh all-time highs.

Outflows from these ETFs amounted to $5.7 billion year-to-date, mainly in North America, which accounted for $4.7 billion. The data included a $2.9 billion outflow in February, pointing at a potentially accelerating downtrend.

According to The World Gold Council, factors contributing to this trend include a strong labor market, higher-than-expected inflation and investor expectations of a potential rate cut by the Federal Reserve.

The rebound in the 10-year Treasury yield and a stronger dollar further weighed on gold prices and ETF holdings in the region. The strength of U.S. equities also diverted investor attention away from gold.

On a global scale, Asia experienced net inflows for the 12th consecutive month, while other regions faced limited losses. Geopolitical tensions, including conflicts in Ukraine, Israel and the Middle East, along with rising trade protectionism and resource nationalism, contributed to disruptions in global supply chains and drove additional interest in the precious metal.

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Despite the sustained outflows from gold ETFs, the price surge of precious metal continues, driven by a jump in speculative betting and physical demand from China. Analysts attribute the rise to weak U.S. economic data and anticipation of a Federal Reserve interest rate cut later in the year.

"Central-bank demand for the precious metal remains historically strong, and that’s clearly helping drive up the gold price as sovereign nations favor the precious metal as a safe haven against the worsening geopolitical outlook,” Adrian Ash, director of research at BullionVault said in an interview for MarketWatch.

While Ash clarified these new all-time highs could be vulnerable to central banks because gold pays no income, he added that "any dip could prove a good opportunity to buy into the underlying strength in gold."

Despite Bitcoin’s rising popularity, gold and Bitcoin ETFs have seen divergent trends. Gold ETFs faced outflows, while Bitcoin ETFs experienced inflows. Yet, per Martin Leinweber, a digital assets product strategist at MarketVector Indexes, gold and Bitcoin are not yet substitutes. The fact that the former's ETFs have seen inflows while the latter has seen outflows might just be a coincidence since he believed investors still see Bitcoin as a risky asset.

Investors interested in gold ETFs might Check SPDR Gold Trust GLD, iShares Gold Trust IAU, Abrdn Physical Gold Shares ETF SGOL or VanEck Gold Miners GDX, which invests in global gold miner equities.

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