Gold: Funds accelerated purchases in June, registering the largest flow in more than a year

For the second consecutive month last June, the International gold-backed ETF funds attracted a high global investment flow of more than $1.4 billion. It’s about the largest inflow of funds into gold ETFs since May last year.

According to international statistics, the income was widespread and All regions recorded gains except North America, which experienced slight losses for the second month. In general, the Lower yields in key regions and weaker currencies against the dollar boosted gold’s appeal to local investors.

The Global gold ETF holdings continued to recoverwhile its total assets under management remained stable at $233 billion due to a lower gold price in the month.

In so far this year, Global gold ETFs have lost $6.7 billion, their worst first half since 2013, however, thanks to recent capital inflows and a considerable increase in the gold price, its total assets under management have increased by 8.8% in the first half of 2024. The Total holdings have fallen by 120 tonnes (-3.9%) to 3,105 tonnes during the half year, below its October 2020 monthly high of 3,915 tonnes.

While Asian funds attracted a record $3 billion in the first half, they were significantly outweighed by collective outflows in North America and Europe totaling $9.8 billion, according to WGC data.

London market experts LBMA explain that Western investors in gold ETFs did not react as expected to the rise in the gold price, which usually drives investment flows, against a backdrop of high interest rates and heightened risk appetite driven by the rise of artificial intelligence. In contrast, Asian flows coincided with price strength: weak currencies against the dollar and the astonishing performance of gold in those currencies attracted investors from the region.

At the regional level, capital outflows in North America remained moderate, with $573 million lost in June. For analysts, the strength of the dollar and the continued rally in stocks may have drawn investors’ attention away from gold despite the fall in US Treasury yields. However, rallies in geopolitical risk triggered sporadic inflows, which partially offset the higher outflows during the month.

The balance sheet for the semester shows outflows of 4.9 billion dollars in the region, the largest in three years. However, the 13% rise in the gold price during the first half also led to a 7.7% increase in the region’s total assets under management, even though holdings fell by 78 tonnes.

For its part, European funds totaled $1.4 billion in June, the second consecutive month of capital inflows, helping to reduce capital outflows from Europe in the first half to $4.9 billion.

Gold: What central banks do

About, The region’s central banks took a different path from the US Federal Reserve (Fed), In June, for example, the European Central Bank (ECB) implemented its first rate cut in almost five years, while the Swiss National Bank lowered rates for the second time this year. In the United Kingdom, the Bank of England hinted that it was considering a possible cut, but left rates unchanged after the surprise announcement of a general election. Therefore, the WGC explains, the reduction in yields was a key factor for capital inflows from the region. In addition, the fall in stocks and political uncertainties related to the elections in the United Kingdom and France, which caused notable capital inflows in those countries, also boosted investor interest in gold.

However, 2024 was the worst first half of the year for European funds since 2013, with losses of $8 billion. Despite a 6% drop in holdings, total assets under management of European funds rose 6.3% during the first half, thanks to higher gold prices.

On the Asian side, it is observed that it extended its streak of capital inflows to 16 months.attracting $560 million in June. As in previous months, capital inflows from Asia were mainly driven by China, which added $429 million in the month. Among the factors that kept Chinese investors’ interest in gold high, experts believe that persistent weaknesses in stocks and the property sector, as well as the continued depreciation of the yuan, were highly relevant. Japan also witnessed its 16th consecutive month of capital inflows in June, supported mainly by a weakened yen.

This way Asia recorded inflows of $3.1 billion in the first halfsignificantly outperforming all other markets and being the only region to record positive flows. This represents the strongest first half on record for Asian funds, driven primarily by record inflows in China and Japan. Supported by record inflows and a higher gold price, total assets under management for Asian funds reached $14 billion, the highest level ever, while holdings increased by 41 tonnes.

Following two consecutive monthly outflows, funds from other regions saw a small inflow of $37 million in June, led by Australia and South Africa. In the first half, funds listed in other regions saw moderate outflows, mainly from Turkey.