Gold is gaining renewed traction among investors, with recent data showing a positive shift in gold exchange-traded fund (ETF) flows. According to the World Gold Council (WGC), global physically-backed gold ETFs saw an inflow of $2.1 billion in August, marking the fourth consecutive month of positive inflows following an extended period of outflows.
The WGC report highlights that all regions reported inflows, with Western funds contributing significantly. The rise in gold prices, which increased by 3.6%, coupled with these inflows, boosted global assets under management (AUM) by 4.5% to a record high of $257 billion. Total gold holdings also grew by 29 tons, reaching 3,182 tons by the end of August.
Year-to-date, global gold ETFs have reduced their losses to $1 billion. The decline in holdings for 2024 has been trimmed to 44 tons. During the first eight months of the year, Asia has seen the largest inflows of $3.5 billion, while Europe and North America experienced outflows of $3.4 billion and $1.5 billion, respectively.
North America experienced its second consecutive month of positive flows, adding $1.4 billion in August, while European funds attracted $362 million, continuing their inflow streak. Asian funds, though still seeing inflows for 18 months, saw a slowdown with only $32 million added in August—the smallest increase since May 2023.
The report also noted that funds from other regions had their third consecutive monthly inflow, totaling $264 million—the highest ever recorded. South Africa saw its strongest monthly inflow, driven by falling yields and expectations of a domestic rate cut. Australia also recorded three consecutive months of inflows.
Gold trading volumes globally declined by 3.2% month-over-month to $241 billion per day. Over-the-counter (OTC) trading volumes increased by 5.9% to $158 billion per day, while exchange-traded activities fell by 18% to $80 billion, primarily due to a 28% drop in COMEX volumes. Conversely, trading at the Shanghai Futures Exchange rose by 11%, and gold ETF trading volumes increased by 17%, driven mainly by North American funds.
Gold prices rose by 3.6% to $2,513 per ounce in August, reaching a new all-time high on August 20 before a slight decline. The WGC’s Gold Return Attribution Model (GRAM) attributes the price increase to a significant drop in the US dollar and lower 10-year Treasury yields, as the Federal Reserve signaled potential rate cuts. However, a momentum factor, where high returns in one month often lead to lower returns in the next, also played a role.
Despite a weaker US dollar, gold prices gained across almost all major currencies. Looking ahead, the WGC notes the challenging macroeconomic environment due to conflicting economic data. Global GDP growth remains steady at 2.5%, and composite PMIs are positive, but manufacturing, especially in Europe and China, is struggling.
In the US, economic conditions are mixed with positive composite PMIs and retail sales, but rising unemployment and loan delinquencies raise recession concerns. The WGC anticipates a “soft landing” as the Fed prepares for potential interest rate cuts.
The report also observed increased activity in gold options markets, with positions at multi-year highs. This trend reflects investor hedging or speculation on interest rate policies and upcoming US elections. The high level of short-term implied volatility compared to longer-term volatility indicates heightened concerns over monetary policy and election outcomes.
While macroeconomic uncertainties persist, the WGC suggests that gold remains an attractive asset due to its potential as a hedge against immediate risks and a beneficiary of lower interest rates. However, the ongoing slowdown in China might impact gold demand, particularly for jewelry, although Indian ETF demand and Western inflows have provided a counterbalance.
