Global physically backed gold exchange traded funds (ETFs) have lost $6.7 billion in the first half of calendar year 2024 (H1-CY24), suffering their worst first half in a calendar year since 2013, said a recent note by World Gold Council (WGC). Total holdings, the report said, have dropped by 120 tonnes (-3.9 per cent) to 3,105 tonnes during this period.
“While Asian funds attracted a record $3 billion during the first half of 2024 (H1-CY24), they were significantly outpaced by collective outflows in North America and Europe to the tune of $9.8 billion," WGC said.
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Western gold ETF investors, according to the report, did not react as anticipated to the rise in the gold price – which commonly drives up investment flows – amidst a high level of interest rates and a more risk-on sentiment generated by the AI boom.
"In contrast, Asian flows rhymed with the price strength – weaknesses in non-dollar currencies and gold’s staggering performance in those currencies attracted investors in the region," WGC said.
WGC defines gold ETFs as regulated securities that hold gold in physical form. These include open-ended funds traded on regulated exchanges and other regulated products such as closed-end funds and mutual funds.
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Gold ETF assets are tracked by WGC in two ways – the quantity of gold they hold (generally measured in tonnes), and the equivalent value of those holdings in US dollars (AUM). They also monitor how these fund assets change through time by looking at two key metrics - demand and fund flows.
Asia an outlier
Region-wise, Asia, according to WGC, was an outlier that registered inflows of $3.1 billion in H1-CY24, significantly outpacing all other markets and the only region witnessing positive flows.
“This represents the strongest ever H1 for Asian funds, mainly driven by record-level inflows into China and Japan. Supported by record-breaking inflows and a higher gold price, the total AUM of Asian funds reached $14 billion, the highest ever, while collective holdings increased by 41 tonnes,” WGC said.
North America, WGC said, saw outflows of $4.9 billion during H1, the largest in three years. However, a 13 per cent rise in the gold price during H1, the report said, also resulted in a 7.7 per cent increase in North America’s total assets under management (AUM). CLICK HERE FOR A DETAILED GRAPHIC
European funds, too, saw their worst show since 2013 (-$8 billion). Despite a 6 per cent fall in holdings, WGC said, the total AUM of European funds saw a 6.3 per cent rise during the first half, thanks to the higher gold price.
Two in a row
In June, global physically backed gold ETFs witnessed their second consecutive monthly inflow and attracted $1.4 billion, WGC said. All regions saw gains except North America, which experienced mild losses ($573 million) for the second consecutive month.
“In general, lower yields in key regions and non-dollar currency weaknesses increased gold’s allure to local investors,” WGC said.
European funds, too, added $1.4 billion in June, which helped narrow Europe’s H1-CY24 outflow to $4.9 billion. The region’s central banks, according to WGC, adopted a different path to that of the US Fed that aided this performance.
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For instance, in June, the European Central Bank (ECB) delivered its first rate cut for almost five years, whilst the Swiss National Bank lowered rates for the second time in 2024. In the UK, the Bank of England (BoE) hinted that a potential cut was on the cards, but left rates unchanged following a surprise general election announcement.
“Lowering yields were a key contributor to the region’s (Europe) inflows in June. Additionally, falling equities and political uncertainties related to elections in the UK and France, which sparked notable inflows there, also pushed up investor interest in gold,” the WGC report said.
