In April, physically backed gold ETFs experienced notable dynamics across different regions, reflecting diverse investor sentiments and market conditions.
Global Overview: Outflows Despite Price Strength
Despite the continued strength in gold prices, physically backed gold ETFs witnessed global outflows of US$2 billion in April, extending the trend of aggregate monthly losses. This decline led to a reduction in collective holdings by 33 tonnes, ending the month at 3,079 tonnes, marking a 6% decrease from the previous 12-month average. However, the positive price trend of gold contributed to a 3% month-on-month increase in total assets under management (AUM) to reach US$229 billion, the highest since April 2022.
Regional Insights:
North America: North American funds experienced their second consecutive monthly inflow, albeit modest, attracting US$124 million in April. This inflow was largely driven by strong gold price performance, which triggered in-the-money (ITM) call options of major gold ETFs, resulting in sizable inflows. Additionally, heightened geopolitical risks and financial market volatilities further bolstered inflows into North American gold ETFs. Despite these positive inflows, North America still recorded year-to-date outflows of US$4 billion, primarily due to significant outflows in January and February.
Europe: Europe continued to lead global outflows, losing US$4 billion in April, representing the eleventh consecutive month of losses. Funds listed in the UK, France, and Germany notably contributed to these outflows. Cooling inflation readings and revised expectations of rate cuts from the Bank of England and the European Central Bank dampened investor interest in gold ETFs. Increased yields in German Bunds and UK Gilts further detracted from gold ETF appeal. Moreover, some investors likely opted to take profits on their holdings during the month.
Asia: Asian funds extended their inflow streak to 14 months, with China emerging as the main driver in April. Chinese gold ETFs experienced record monthly inflows of US$1 billion and achieved their highest AUM ever, reflecting a remarkable 36% growth in assets since the beginning of 2024. Factors contributing to this surge include a sluggish equity market, expectations of a weaker local currency, increased promotional efforts from ETF providers, and strong gold price performance.
Other Regions: Funds in other regions experienced mild outflows of US$65 million in April, driven mainly by Australia and South Africa. Australia accounted for the bulk of year-to-date outflows amounting to US$58 million.
Despite regional variations in flows, gold ETFs continue to attract attention and investment amid evolving market dynamics, geopolitical uncertainties, and shifts in central bank policies. The performance of gold ETFs in the coming months will likely hinge on developments related to inflation, interest rates, and broader economic trends globally.
