Global gold-backed exchange-traded funds (ETFs) experienced an eighth-straight month of outflows in January thanks to heavy redemptions in North America. That’s according to latest data from the World Gold Council (WGC).
The organisation noted that “as the market pushed back against bets on early rate cuts by major central banks, gold prices retreated in January, dimming investors’ interest in gold ETFs.”
Funds endured net outflows of $2.8 billion last month, equivalent to some 51 tonnes. This pulled collective holdings in these financial instruments down to 3,175 tonnes, while assets under administration (AUAs) dropped 2% to $210 billion.
Prices of the yellow metal declined 1% over the course of January as hopes over imminent interest cuts by the Federal Reserve and other central banks receded.
North American Holdings Drop To 4-Year Low
Total holdings in North American ETFs fell by 36 tonnes over the course of last month, to 1,606 tonnes. On a dollar basis funds endured outflows of $2.3 billion to take AUAs to $106 billion.
This snaps two consecutive months of inflows into North American funds. As of the end of January, total holdings in the region’s ETFs stood at their lowest since April 2020.
The WGC commented that “recent robust US economic data has led investors to reassess their bets on the Fed’s first rate cut in March,” while strong data also boosted the US dollar and Treasury yields at the expense of gold.
“With US equities reaching new highs, local investors’ appetite for gold was further dented,” the body continued.
European ETFs weaken, Asia records outflows
Holdings in European ETFs, meanwhile, dropped for their eighth successive monthly. An 18-tonne outflow took aggregated holdings to 1,368 tonnes. Redemptions came in at $731 million, which in turn pulled AUAs to $90 billion.
The WGC commented that “although the European Central Bank (ECB) held rates unchanged for the third successive meeting in January, officials have been vocal in delivering the message that the market may have gone too far in pricing early rate cuts.”
It added that “this gave local investors a reality check, pushing back their bets on lower interest rates ahead and fuelling notable rebounds in the region’s government bond yields and currencies.”
However, investor interest Asia-based ETFs continued to rise at the start of 2024. In January these funds experienced a 3-tonne (or $215 million inflow), taking total holdings to 141 tonnes and cumulative AUAs to just under $10 billion.
The WGC said that “China continued to dominate the region’s inflows as the sixth consecutive monthly fall in local equities and a weaker currency lifted investors’ safe-haven demand.”