Gold outflows despite rising gold Prices

2023 marked global gold ETFs’ third consecutive annual outflow despite a 15% gold price rise, shedding US$15bn. Europe lost the most and North America also experienced sizable outflows. Asia, on the other hand, was the only region that attracted inflows, while the other region witnessed mild outflows.

European combined outflows in 2023 amounted to US$11bn, the worst year since 2013 (-US$13bn). The region’s inflows, mainly in March, were aided by systemic risk fears in response to the mini-banking sector crisis and alluring local gold price performances.

Outflows during most of the year (-US$13bn) were driven by the region’s rocketing interest rates, the hawkish stance of local central banks, strong currencies and rising living costs which, among other factors, may have led to profit taking. North American funds lost US$4bn in 2023.

Outflows (-US$10bn) were mainly associated with gold price weakness and surging opportunity costs including higher Treasury yields and a stronger dollar. They were partially offset by inflows during most of H1–supported by strong gold price rises and safe-haven demand amid the banking sector turmoil – and towards the end of the year when yields and the dollar weakened on intensifying rate cut expectations.

Asia attracted inflows of US$1bn in 2023, the only area registering positive gold ETF demand. China, Japan and India contributed the most. Global geopolitical tensions, local economic uncertainties as well as the eye-catching performances of gold in different currencies fuelled positive gold ETF demand in these markets during the year.

The Other region saw a mild annual loss of US$70mn. Outflows from Australia and South Africa wiped out Turkish inflows amid rampant inflationary pressure, the weakening local currency and various other concerns.

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